THE LIFE INSURANCE CORPORATION ACT, 1956 

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ARRANGEMENT OF SECTIONS                                                                                                            

SECTIONS 

1. Short title and commencement. 

2. Definitions. 

________ 

CHAPTER I 
PRELIMINARY 

CHAPTER II 

ESTABLISHMENT OF LIFE INSURANCE CORORATION OF INDIA 

3. Establishment and incorporation of Life Insurance Corporation of India. 

4. Board of Directors. 

4A. Disqualification to be director. 

4B. Disclosure of interest by director and senior management. 

4C. Related party transactions. 

4D. Adjudication of penalties. 

5. Capital of Corporation. 

5A. Transferability of shares. 

5B. Register of members, etc. 

5C. Declaration in respect of beneficial interest in shares. 

5D. Shares to be securities. 

5E. Right of registered members to nominates. 

CHAPTER III 
FUNCTIONS OF THE CORPORATION 

6. Functions of the Corporation. 

6A. Power to impose conditions, etc. 

CHAPTER IV 
TRANSFER OF EXISTING LIFE INSURANCE BUSINESS TO THE CORPORATION 

7. Transfer of assets and liabilities of existing insurers carrying on controlled business. 

8. Provident, superannuation and other like funds. 

9. General effect of vesting of controlled business. 

10. Provisions as to composite insurers. 

11. Transfer of service of existing employees of insurers to the Corporation. 

12. Transfer of services of existing employees of chief agents of insurers to the Corporation in certain 

cases. 

13. Duty to deliver possession of property and documents relating thereto. 

14. Power of Corporation to modify contracts of life insurance in certain cases. 

15. Right of Corporation to seek relief in respect of certain transactions of the insurer. 

16. Compensation for acquisition of controlled business. 

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SECTIONS 

17. Constitution of Tribunals. 

CHAPTER V 
MANAGEMENT 

18. Offices, branches and agencies. 

19. Executive Committee. 

19A. Investment Committee. 

19B. Nomination and Remuneration Committee. 

19C. Audit Committee. 

19D. Other Committees. 

20. Chief Executive and Managing Directors. 

21. Corporation to be guided by the directions of Central Government. 

22. Zonal Managers. 

23. Staff of the Corporation. 

23A. Annual general meeting and other general meetings. 

CHAPTER VI 
FINANCE, ACCOUNTS AND AUDIT 

24. Funds of the Corporation. 

24A. Books of account, etc. 

24B. Financial statements. 

24C. Board’s report. 

24D. Penalties. 

25. Appointment of auditors. 

25A. Removal and resignation of auditor. 

25B. Powers and duties of auditors and auditor’s report. 

25C. Internal auditor. 

25D. Special auditor. 

26. Actuarial valuations. 

27. Annual report of activities of Corporation. 

28. Surplus from life insurance business, how to be utilised. 

28A. Profits from any business (other than life insurance business) how to be utilised. 

28B. Declaration of dividend. 

28C. Unpaid Dividend Account. 

29. Reports to be laid before Parliament. 

CHAPTER VII 
MISCELLANEOUS 

30. Corporation to have the exclusive privilege of carrying on life insurance business.  

30A. Exclusive privilege of Corporation to cease. 

31. Exception in the case of insurance business in respect of persons residing outside India. 

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SPECIAL 

32. Power of Corporation to have official seal in certain cases. 

33. Requirement of foreign laws to be complied with in certain cases. 

34. Revesting of certain shares vested in the Administrator General. 

35. Repatriation of assets and liabilities in the case of foreign insurers in certain cases. 

36. Contracts of chief agents and special agents to terminate. 

37. Policies to be guaranteed by Central Government. 

38. Liquidation of Corporation. 

39. Special provisions for winding up of certain insurers. 

40. Penalty for withholding property, etc. 

41. Tribunal to have exclusive jurisdiction in certain matters. 

42. Enforcement of decisions of Tribunals. 

43. Application of the Insurance Act. 

43A. [Omitted.] 

44. Act not to apply in certain cases. 

45. Special provisions regarding transfer of controlled business of certain composite insurer. 

46.  Defects  in  constitution  of  Corporation  or  Committees  or  in  appointment  or  nomination  of 

directors not to invalidate acts or proceedings. 

47. Protection of action taken under this Act. 

48. Power to make rules. 

49. Power to make regulations. 

50. Form, manner, etc. for companies to apply with modifications. 

51. Power to remove difficulties. 

THE FIRST SCHEDULE. 

THE SECOND SCHEDULE. 

THE THIRD SCHEDULE. 

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THE LIFE INSURANCE CORPORATION ACT, 1956 

ACT NO. 31 OF 1956 

An  Act  to  provide  for  the  nationalisation  of  life  insurance  business  in  India  by  transferring  all 
such business to a Corporation established for the purpose and to provide for the regulation 
and  control  of  the  business  of  the  Corporation  and  for  matters  connected  therewith  or 
incidental thereto. 

BE it enacted by Parliament in the Seventh Year of the Republic of India as follows:— 

[18th June, 1956.] 

CHAPTER I 
PRELIMINARY 

1.  Short  title  and  commencement.—(1)  This  Act  may  be  called  the  Life  Insurance  Corporation   

Act, 1956. 

(2)  It  shall  come  into  force  on  such  date1  as  the  Central  Government  may,  by  notification  in  the 

Official Gazette, appoint. 

2. Definitions.—In this Act, unless the context otherwise requires,— 

(1) “appointed day” means the date on which the Corporation is established under section 3; 

2[(1a)  “Audit Committee” means the Committee constituted under section 19C; 

(1b) “Board of Directors” or “Board” means the collective body of the directors  appointed or 

nominated or deemed as such under section 4; 

(1c) “Chairperson” means the Chairperson referred to in clause (a) of sub-section (2) of section 4; 

(1d) “Chief Executive” means,— 

(i)  during the initial period, the Chairperson referred to in sub-clause (i) of  clause (a) of 

sub-section (2) of section 4; 

(ii) after the initial period, the Chief Executive Officer and Managing Director; 

(1e) “Chief Executive Officer and Managing Director” means the Chief Executive Officer 

and Managing Director referred to in clause (b) of sub-section (2) of section 4; 

(1f) “Companies Act” means the Companies Act, 2013 (18 of 2013); 

(1g) “court”  means  “Court”  as  defined in  clause  (29)  of  section  2  of  the  Companies  Act, 2013        

(18 of 2013;] 

(2) “composite insurer” means an insurer carrying on in addition to controlled business any other kind 

of insurance business; 

(3) “controlled business” means— 

(i)  in  the  case  of  any  insurer  specified  in  sub-clause  (a)  (ii)  or  sub-clause  (b)  of  clause  (9)  of 

section 2 of the Insurance Act and carrying on life insurance business— 

(a) all his business, if he carries on no other class of insurance business; 

(b) all the business appertaining to his life insurance business, if he carries on any other class 

of insurance business also; 

1. 1st July, 1956, vide notification No. S. R. O. 1456, dated 26th June, 1956, see Gazette of India, Extraordinary, Part II, sec. 3. 
2.  Ins. by Act 13 of 2021, s. 129 (w.e.f. 30-6-2021). 

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(c)  all  his  business,  if  his  certificate  of  registration  under  the  Insurance  Act  in  respect  of 
general insurance business stands wholly cancelled for a period of more than six months on the 
19th day of January, 1956; 

(ii) in the case of any other insurer specified in clause (9) of section 2 of the Insurance Act and 

carrying on life insurance business— 

(a) all his business in India, if he carries on no other class of insurance business in India; 

(b) all the business appertaining to his life insurance business in India, if he carries on any 

other class of insurance business also in India; 

(c) all his business in India if he certificate of registration under the Insurance Act in respect 
of  general  insurance  business  in  India  stands  wholly  cancelled  for  a  period  of  more  than  six 
months on the 19th day of January, 1956. 

Explanation.—An  insurer  is  said  to  carry  on  no  class  of  insurance  business  other  than  life 
insurance  business,  if  in  addition  to  life  insurance  business,  he  carries  on  only  capital  redemption 
business  or  annuity  certain  business  or  both;  and  the  expression  “business  appertaining  to  his  life 
insurance business” in sub-clauses (i) and (ii) shall be construed accordingly; 

(iii)  in  the  case  of  a  provident  society,  as  defined  in  section  65  of  the  Insurance  Act,  all  its 

business; 

(iv)  in  the  case  of  the  Central  Government  or  a  State  Government,  all  life  insurance  business 

carried on by it, subject to the exceptions specified in section 44; 

(4) “Corporation” means the Life Insurance Corporation of India established under section 3; 

1[(4a) “director” means a director appointed or nominated or deemed as such under section 4; 
(4b) “financial statement”, in relation to the Corporation, includes— 
(i) a balance-sheet as at the end of the financial year; 
(ii) a profit and loss account for the financial year; 
(iii) cash flow statement for the financial year; 
(iv) a statement of changes in equity, if applicable; and 

(v)  any  explanatory  note  annexed  to,  or  forming  part  of,  any  document  referred  to  in          

sub-clause (i) to sub-clause (iv); 
(4c)  “fully  diluted  basis”  shall  mean,  in  relation  to  the  percentage  holding  of  the  Central 
Government on such basis, the total number of shares held by the Central Government expressed as a 
percentage of the total number of shares of the Corporation that would be outstanding if all possible 
sources of conversion are exercised; 

(4d) “independent director” means an independent director referred to in clause (g) of sub-section 

(2) of section 4; 

(4e)  “initial  period”  means  the  period  of  three  years  reckoned  from  the  date  on  which  the 

provisions of section 130 of the Finance Act, 2021 shall come into force;] 

(5) “Insurance Act” means the Insurance Act, 1938 (4 of 1938); 

(6) “insurer” means an insurer as defined in the Insurance Act who carries on life insurance business 
in India and includes the Government and a provident society as defined in section 65 of the Insurance 
Act; 

1[(6a) “Managing Director” means a Managing Director referred to in clause (c) of sub-section (2) of 

section 4;] 

1.  Ins. by Act 13 of 2021, s. 129 (w.e.f. 30-6-2021). 

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1[(7) “member” means every person holding shares of the Corporation and whose name is entered in 

the register of members maintained under clause (a) of sub-section (1) of section 5B; 

(7a)  “Nomination  and  Remuneration  Committee”  means  the  Committee  constituted  under  section 

19B; 

(7b) “notification” means a notification published in the Official Gazette, and the expression “notify” 

shall be construed accordingly;] 

(8) “prescribed” means prescribed by rules made under this Act; 

2[(8a) “special resolution” means a resolution for which the intention to propose the same as a special 
resolution has been duly specified in the notice given to members for calling a general meeting, and the 
votes cast in favour of the resolution by members are not less than three times the number of votes, if any, 
cast against the resolution;] 

(9) “Tribunal” means a Tribunal constituted under section 17 and having jurisdiction in respect of any 

matter under the rules made under this Act; 

3[(10) unless there is anything repugnant in the subject or context, all the words and expressions used 
herein but not defined and defined in the Insurance Act, 1938 (4 of 1938) or in the Companies Act, 2013 
(18 of 2013) shall have the meanings respectively assigned to them in the said Acts.] 

CHAPTER II 

ESTABLISHMENT OF LIFE INSURANCE CORPORATION OF INDIA 

3.  Establishment  and  incorporation  of  Life  Insurance  Corporation  of  India.—(1)  With  effect 
from  such  date  as  the  Central  Government  may,  by  notification  in  the  Official  Gazette,  appoint,  there 
shall be established a Corporation called the Life Insurance Corporation of India. 

(2) The Corporation shall be a body corporate having perpetual succession and a common seal with 
power subject to the provisions of this Act, to acquire, hold and dispose of property, and may by its name 
sue and be sued. 

4[4. Board of Directors.—(1) The general superintendence and direction of the affairs and business 
of the Corporation shall vest in its Board of Directors, which may exercise all such powers and do all such 
acts and things as may be exercised or done by the Corporation and are not by this Act expressly directed 
or required to be done by the Corporation in general meeting. 

(2) The Board of Directors of the Corporation shall consist of the following directors, not exceeding 

eighteen, of whom at least one shall be a woman, namely:— 

(a) a Chairperson of the Board, to be appointed by the Central Government, who shall,— 

(i) during the initial period, be a whole-time director of the Corporation; and 

(ii) after the initial period, be from amongst the non-executive directors nominated or to be 

nominated by the Central Government; 

(b)  after  the  initial  period,  a  Chief  Executive  Officer  and  Managing  Director,  who  shall  be  a 

whole-time director of the Corporation to be appointed by the Central Government: 

Provided  that  where  no  Chief  Executive  Officer  and  Managing  Director  is  appointed  before 
expiry of the initial period, the individual holding office as Chairperson shall be deemed to have been 
appointed as the Chief Executive Officer and Managing Director on and from the date of such expiry; 

(c)  Managing  Directors,  not  exceeding  four,  to  be  appointed  by  the  Central  Government,  who 

shall be whole-time directors of the Corporation; 

1. Subs. by Act 13 of 2021, s. 129, for clause (7) (w.e.f.30-6-2021). 
2. Ins. by s. 129, ibid., (w.e.f. 30-6-2021). 
3. Subs. by s. 129, ibid., for clause (10) (w.e.f. 30-6-2021). 
4. Subs. by s. 130, ibid., for section 4 (w.e.f. 30-6-2021). 

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(d)  an  officer  of  the  Central  Government  not  below  the  rank  of  a  Joint  Secretary  to  the 

Government of India, to be nominated by the Central Government; 

(e)  an  individual  to  be  nominated  by  the  Central  Government,  who  has  special  knowledge  or 
practical experience in actuarial science, business management, economics, finance, human resources, 
information technology, insurance, law, risk management, or any other field the special knowledge or 
practical  experience  of  which  would  be  useful  to  the  Corporation  in  the  opinion  of  the  Central 
Government or who represent the interests of policyholders; 

(f) where the total holding of members other than the Central Government in the paid-up equity 

capital of the Corporation is— 

(a) not more than ten per cent., one individual; 

(b) more than ten per cent., two individuals,  

who  shall  be  elected  by  and  from  amongst  such  members  and  in  such  manner  as  may  be  specified  by 
regulations, to be appointed by the Board; and 

(g)  such  number  of  independent  directors,  not  exceeding  nine,  to  be  recommended  by  the 

Nomination and Remuneration Committee and appointed by the Board. 

(3)  An independent  director  of  the  Corporation  shall, in  relation to the  Corporation,  meet  the  same 
criteria of independence as  an  independent director of  a  company  is  required to  meet  in  relation  to the 
company under sub-section (6) of section 149 of the Companies Act: 

Provided that such a director shall also meet, in addition to the aforesaid criteria, any criteria that the 
Nomination and Renumeration Committee may formulate regarding qualifications, positive attributes and 
independence: 

Provided  further  that  every  such  director  shall  at  the  first  meeting  of  the  Board  in  which  he 
participates  as  a  director  and  thereafter  at  the  first  meeting  of  the  Board  in  every  financial  year  or 
whenever there is any change in the circumstances which may affect his status as an independent director, 
give  a  declaration  that  he  meets  the  criteria  of  independence  under  this  sub-section  and  that  he  is  not 
aware of any circumstance or situation, which exist or may reasonably be anticipated, that could impair or 
impact  his  ability  to  discharge  his  duties  with  an  objective  independent  judgment  and  without  any 
external influence. 

(4) An individual appointed by the Board as a director under clause (f) or clause (g) of sub-section (2) 
shall hold office up to the date of the next annual general meeting or the last date on which the annual 
general meeting should have been held, whichever is earlier, and shall hold office beyond such date only 
if his appointment is approved at the annual general meeting. 

(5)  Before  an  individual  is  appointed  or  nominated  as  a  director  under  sub-section  (2),  the  Central 
Government or the Nomination and Remuneration Committee, as the case may be, shall satisfy itself that 
such an individual as a director shall have no financial or other interest as is likely to affect prejudicially 
the exercise or performance by him of the functions of a director: 

Provided that the Board shall satisfy itself from time to time with respect to every director other than 

a director nominated under clause (d) of sub-section (2) that he has no such interest: 

Provided  further  that,  for  the  purposes  of  this  sub-section,  any  individual  who  is,  or  whose 
appointment or nomination or election is proposed and who has consented to be a director, shall furnish 
such  information  as  the  Central  Government  or  the  Nomination  and  Remuneration  Committee  or  the 
Board, as the case may be, may require. 

(6)  Notwithstanding  anything  contained  in  sub-section  (2),  on  and  from  the  appointed  date,  an 
individual appointed under section 4 who is eligible to be or remain a director under section 4A and who, 
immediately before such appointed date, held the office of a member of the Corporation— 

(i) in the capacity as the Chairman of the Corporation, shall be deemed to be a director and the 

Chairperson under sub-clause (i) of clause (a) of sub-section (2); 

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(ii) in the capacity as a Managing Director of the Corporation, shall be deemed to be a director 

and a Managing Director under clause (c) of sub-section (2); 

(iii) and is an officer of the Central Government not below the rank of a Joint Secretary to the 
Government  of  India  in  the  Department  of  Financial  Services,  shall  be  deemed  to  be  a  director 
nominated under clause (d) of sub-section (2); 

(iv)  and  has  been  in  office  for  a  duration  which  is  the  longest  amongst  members  other  than 
members  referred  to  in  clauses  (i),  (ii)  and  (iii),  shall  be  deemed  to  be  a  director  nominated  under 
clause (e) of sub-section (2): 

Provided that every such individual shall hold office until expiry of the term, if any, specified at 
the  time  of  his  appointment  as  a  member  of  the  Corporation,  or  until  a  director  appointed  or 
nominated, as the case may be, under sub-section (2) in place of such an individual assumes office: 

Provided  further  that  any  act  or  proceeding  of  the  collective  body  of  members  constituting  the 
Corporation under section 4 before the appointed date, shall be deemed to be an act or proceeding, as 
the case may be, of the Board. 

Explanation.—For the purposes of this sub-section, — 

(a) notwithstanding anything contained in clause (7) of section 2, the expression “member” 
shall mean a member appointed to the Corporation constituted under section 4 [as it stood before 
the coming into force of section 130 of the Finance Act, 2021]; 

(b)  “appointed  date”  means  the date  on  which  the  provisions  of  section  130  of the  Finance 

Act, 2021 shall come into force. 

4A. Disqualification to be director.—An individual shall not be eligible to be or remain a director  

if, — 

(a) he is of unsound mind and stands so declared by a competent court; 

(b) he is an undischarged insolvent; 

(c) he has applied to be adjudicated as an insolvent and his application is pending; 

(d)  he  has  been  convicted  by  a  court  of  any  offence,  whether  involving  moral  turpitude  or 
otherwise, and sentenced in respect thereof to imprisonment for not less than six months and a period 
of five years has not elapsed from the date of expiry of the sentence: 

Provided that if an individual has been convicted of any offence and sentenced in respect thereof 

to imprisonment for a period of seven years or more, he shall not be eligible to be a director; 

(e)  an  order  disqualifying  him  to  be  a  director  has  been  passed  by  a  court  or  the  National 
Company Law Tribunal constituted under section 408 of the Companies Act, and the order is in force; 

(f)  he  has  not  paid  any  calls  in  respect  of  any  shares  of  the  Corporation  held  by  him,  whether 
alone or jointly with others, and six months have elapsed from the last day fixed for the payment of 
such call; 

(g) he attracts any disqualification for being a director of a company under the provisions of sub-
section  (2)  of  section  164  of  the  Companies  Act,  subject  to  such  exceptions  thereto  as  the  Central 
Government may, by notification, specify; 

(h) he is a salaried government official, other than an individual nominated director under clause 

(d) of sub-section (2) of section 4; 

(i) he is an insurance agent or an intermediary or an insurance intermediary; 

(j) he is an employee of the Corporation, other than the Chief Executive or a Managing Director, 

or of its subsidiary or associate company; 

(k) he is a director of a subsidiary or an associate company of the Corporation and is other than 

the Chief Executive or a Managing Director; 

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(l) he is an employee or a director or a promoter of any insurer carrying on life insurance business 
anywhere in the world, other than the Corporation or its subsidiary or associate company, or of any 
holding company, subsidiary or associate company of such an insurer; 

(m) he absents himself from all the meetings of the Board held during a period of twelve months, 

with or without seeking leave of absence of the Board: 

Provided that the disqualifications referred to in clauses (d) and (e) shall continue to apply even if 

an appeal or petition has been filed against the order of conviction or disqualification. 

4B.  Disclosure  of  interest  by  director  and  senior  management.—(1)  Every  director  shall  at  the 
first meeting of the Board in which he participates as a director and thereafter at the first meeting of the 
Board in every financial year, or whenever there is any change in the disclosures already made, then at the 
first Board meeting held after such change, disclose his concern or interest in any body corporate, which 
shall include shareholding, in such manner as may be prescribed. 

(2)  Every  director  who  is  in  any  way,  whether  directly  or  indirectly,  concerned  or  interested  in  a 
contract  or  arrangement  or  proposed  contract  or  arrangement  entered  into  or  to  be  entered  into  by  the 
Corporation— 

(a)  with  a  body  corporate in  which  such  director  or  such  director  in  association  with  any  other 
director,  holds  more  than  two  per  cent.  shareholding  of  that  body  corporate,  or  is  a  promoter, 
manager, chief executive officer or trustee of that body corporate, or 

(b) with a firm or other entity in which such director is a partner, owner or member, as the case 
may be, shall not participate in any meeting of the Board or of its Committee in which such contract 
or  arrangement  is  deliberated  upon,  or  in  any  other  deliberations  or  discussions  regarding  such 
contract or arrangement, and shall, in the case of such deliberations in a meeting of the Board or its 
Committee, disclose the nature of his concern or interest to the Board or the Committee, as the case 
may be: 

Provided that where any director who is not so concerned or interested at the time of entering into 
such  contract  or  arrangement,  he  shall,  if  he  becomes  concerned  or  interested  after  the  contract  or 
arrangement is entered into, disclose his concern or interest forthwith when he becomes concerned or 
interested, or at the first meeting of the Board held after he becomes so concerned or interested. 

(3) A contract or arrangement entered into by the  Corporation without disclosure under sub-section 
(2)  or  with  participation  by  a  director  who  is  concerned  or  interested  in  any  way,  whether  directly  or 
indirectly, in such contract or arrangement, shall be voidable at the option of the Corporation. 

(4)  Such  employees  as  the  Board  may  specify  as  constituting  the  senior  management  of  the 
Corporation  shall  make  disclosures  to  the  Board  relating  to  all  material,  financial  and  commercial 
transactions, in which they have personal interest that may have a potential conflict with the interest of the 
Corporation,  and  the  Board  shall  formulate  a  policy  on  such  transactions,  including  any  materiality 
threshold therefor, and shall review such policy at least once every three years. 

Explanation.—For the purposes of this sub-section, conflict of interest relates to dealing in the shares 
of the Corporation or any of its subsidiaries or associate companies, commercial dealings with bodies in 
which the senior management individual or his relatives have shareholding, etc. 

(5) If an individual who is a director contravenes the provisions of sub-section (1) or sub-section (2), 
or  an  employee  referred  to  in  sub-section  (4),  contravenes  such  provisions,  such  an  individual  or 
employee shall be liable to pay penalty of a sum of up to one lakh rupees. 

(6) Without prejudice to anything contained in sub-section (5), it shall be open to the Corporation to 
proceed against a director or any other employee who had entered into such contract or arrangement in 
contravention of the provisions of this section for recovery of any loss sustained by it as a result of such 
contract or arrangement. 

Explanation.—For the purposes of sections 4B and 4C, the expression “body corporate” shall include 
a company, a body corporate as defined under clause (11) of section 2 of the Companies Act, a firm, a 
financial  institution  or  a  scheduled  bank  or  a  public  sector  enterprise  established  or  constituted  by  or 

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under  any  Central  Act  or  State  Act,  and  any  other  incorporated  association  of  persons  or  body  of 
individuals. 

4C.  Related  party  transactions.—(1)  Except  with  the  consent  of  the  Board  and  subject  to  such 
conditions as may be prescribed, the Corporation shall not enter into any contract or arrangement with a 
related party with respect to— 

(a) sale, purchase or supply of any goods or materials; 

(b) selling or otherwise disposing of, or buying, property of any kind; 

(c) leasing of property of any kind; 

(d) availing or rendering of any services; 

(e) appointment of any agent for purchase or sale of goods, materials, services or property; 

(f)  such  related  party’s  appointment  to  any  office  or  place  of  profit  in  the  Corporation,  its 

subsidiary or associate company; 

(g) underwriting the subscription of any securities, or derivatives thereof, of the Corporation: 

Provided  that  no  contract  or  arrangement  involving  transactions  exceeding  such  sums  as  the 

Board may specify, shall be entered into except with the prior approval in the general meeting: 

Provided  further  that  no  member  shall  vote in  such  general meeting  to  approve  any  contract or 

arrangement which may be entered into by the Corporation, if such member is a related party: 

Provided also that nothing in this sub-section shall apply to any transactions entered into by the 
Corporation  in  its  ordinary  course  of  business,  other  than  transactions  which  are  not  on  an  arm’s 
length basis: 

Provided also that the requirement of approval under the first proviso shall not be applicable for 

transactions entered into between the Corporation and— 

(a) its wholly owned subsidiary, if any, whose financial statements are consolidated with the 

Corporation and placed before the members at the general meeting for adoption; 

(b)  a  Government  company,  or  the  Central  Government,  or  any  State  Government,  or  any 

combination thereof, in respect of contract or arrangement entered into between them. 

Explanation.—In this sub-section,— 

(a) the expression “office or place of profit” means any office or place— 

(i) where such office or place is held by a director, if the director holding it receives from 
the Corporation anything by way of remuneration over and above the remuneration to which 
he  is  entitled  as  director,  by  way  of  salary,  fee,  commission,  perquisites,  any  rent-free 
accommodation, or otherwise; 

(ii)  where  such  office  or  place  is  held  by  an  individual  other  than  a  director  or  by  any 
firm,  private  company  or  other  body  corporate,  if  the  individual,  firm,  private  company  or 
body  corporate  holding  it  receives  from  the  Corporation  anything  by  way  of  remuneration, 
salary, fee, commission, perquisites, any rent-free accommodation, or otherwise; 

(b) the expression “arm’s length transaction” means a transaction between two related parties 

that is conducted as if they were unrelated, so that there is no conflict of interest. 

(2) The Board shall formulate a policy on materiality of related party transactions and on dealing with 
related  party  transactions,  including  clear  threshold  limits,  and  shall  review  and  update  such  policy  at 
least once in every three years. 

Explanation.—For the removal of doubts, it is hereby clarified that a transaction with a related party 
shall  be  considered  material  if  the  amount  of  the  transaction  to  be  entered  into,  individually  or  taken 
together  with  previous  transactions  during  a  financial  year,  exceeds  such  percentage  of  the  annual 

10 

 
consolidated turnover of the Corporation as per its last audited financial statements as may be specified in 
any regulation made by the Securities and Exchange Board in this behalf. 

(3) Every contract or arrangement entered into under sub-section (1) shall be referred to in a report 
made  by  the  Board  to  the  members,  along  with  the  justification  for  entering  into  such  contract  or 
arrangement. 

(4) Where any contract or arrangement is entered into by a director or any other employee, without 
obtaining the consent of the Board or approval by a resolution in the general meeting under sub-section 
(1) and if it is not ratified by the Board or, as the case may be, by the members at a meeting within three 
months  from  the  date  on  which  such  contract  or  arrangement  was  entered  into,  such  contract  or 
arrangement shall be voidable at the option of the Board or, as the case may be, of the members and if the 
contract or arrangement is with a related party to any director, or is authorised by any other director, the 
directors concerned shall indemnify the Corporation against any loss incurred by it. 

(5) Without prejudice to anything contained in sub-section (4), it shall be open to the Corporation to 
proceed against a director or any other employee who had entered into such contract or arrangement in 
contravention of the provisions of this section for recovery of any loss sustained by it as a result of such 
contract or arrangement. 

(6)  Any  director  or  any  other  employee  of  the  Corporation  who  had  entered  into  or  authorised  a 
contract or arrangement in violation of the provisions of this section, shall be liable to pay penalty of a 
sum of up to twenty-five lakh rupees. 

4D.  Adjudication  of  penalties.—(1)  The  Central  Government  may,  by  an  order  published  in  the 
Official Gazette, appoint an officer of the Central Government, not below the rank of Joint Secretary to 
the  Government  of  India  or  equivalent,  as  adjudicating  officer  for  adjudging  penalties  under  the 
provisions of this Act. 

(2)  The  adjudicating  officer  may,  on  a  complaint  made  in  writing  by  a  person  authorised  by  the 
Corporation, and after giving a reasonable opportunity of being heard, by an order impose penalty on a 
director or employee liable to penalty under any provision of this Act on account of any contravention or 
violation on his part. 

(3) The adjudicating officer, for the purposes of discharging his functions under this Act, shall have 
the same powers as are vested in a civil court under the Code of Civil Procedure, 1908 (5 of 1908) while 
trying a suit, to summon and enforce the attendance of any person and examine him on oath and to require 
the discovery and production of documents or other electronic records, and shall be deemed to be a civil 
court for purposes of Order XXI of the Civil Procedure Code, 1908. 

(4) A director or employee aggrieved by any order made by the adjudicating officer may prefer an 
appeal to such officer to the Central Government of a rank higher than that of the adjudicating officer as 
the Central Government may appoint as appellate authority, within thirty days from the date on which a 
copy of the order made by the adjudicating officer is received by the aggrieved individual, and the officer 
so appointed may, after giving the individual an opportunity of  being heard, pass such order as he may 
deem fit, confirming, modifying or setting aside the order appealed against, or remanding the case to the 
adjudicating officer for disposal, with such directions as he may deem fit. 

(5) Where a director or employee of the Corporation having already been subjected to penalty under 
this Act for any contravention or violation of any provision of this Act, again commits such contravention 
or  violation  within  a  period  of  three  years  from  the  date  of  order imposing  such  penalty  passed  by  the 
adjudicating officer, he shall be liable for the second or subsequent contravention or violation for twice 
the amount of penalty provided therefor.] 

1[5. Capital of Corporation.—(1) The authorised share capital of the Corporation shall be twenty-

five thousand crore rupees, divided into two thousand and five hundred crore shares of ten rupees each: 

1. Subs. by Act 13 of 2021, s. 131, for section 5 (w.e.f. 30-6-2021). 

11 

 
                                                           
Provided that the Central Government  may, by notification, increase the authorised share capital or 
reduce the authorised share capital to such amount not less than the amount of the paid-up equity capital 
of the Corporation immediately before the coming into force of section 131 of the Finance Act, 2021, as it 
may deem fit: 

Provided  further  that  the  Corporation  may,  with  the  previous  approval  of  the  Central  Government, 
consolidate  or  reduce  the  nominal  or  face  value  of  the  shares,  divide  the  authorised  share  capital  into 
equity  share  capital  or  a  combination  of  equity  and preference  share  capital,  and  divide  the  nominal  or 
face value of shares into such denomination as the Corporation may decide. 

(2) The Corporation shall, with the previous approval of the Central Government, issue equity shares 
to  the  Central  Government  in  consideration  for  the  paid-up  equity  capital  provided  by  the  Central 
Government to the Corporation as it stood before the coming into force of section 131 of the Finance Act, 
2021. 

(3) The share capital of the Corporation shall consist of equity shares and preference shares, which 

may be fully paid-up or partly paid-up: 

Provided that the  Board  may  determine  the terms  of issue  of  partly  paid-up  shares and payment  of 

calls for such partly paid-up shares. 

(4)  The  Corporation  may  from  time  to  time  increase  its  issued  share  capital,  with  the  previous 
approval of the Central Government, whether by public issue or rights issue or preferential allotment or 
private  placement  or  issue  of  bonus  shares  to  existing  members  holding  equity  shares,  or  by  issue  of 
shares  to  employees  pursuant  to  share  based  employee  benefits  schemes,  or  by  issue  of  shares  to  life 
insurance policyholders of the Corporation, or otherwise: 

Provided that the Central Government shall, on a fully diluted basis hold, — 

(a)  at  all  times,  not  less  than  fifty-one  per  cent.  of  the  issued  equity  share  capital  of  the 

Corporation; 

(b) during a period of five years from the date of first issue of shares to any person other than the 
Central  Government,  not  less  than  seventy-five  per  cent.  of  the  issued  equity  share  capital  of  the 
Corporation: 

Provided further that no shares shall be issued other than by way of rights issue unless authorised 
by  a  special  resolution,  except  in  the  circumstances  where  the  provisions  of  the  second  and  third 
provisos to sub-section (1) of section 23A apply: 

Provided also that issue of shares to life insurance policyholders of the Corporation shall not be 

by preferential allotment or private placement. 

(5) Where the Corporation issues shares at a premium, whether for cash or otherwise, a sum equal to 
the  aggregate  amount  of the  premium  received on those  shares  shall  be  transferred to  a  share  premium 
account, and the provisions of sub-sections (7) and (8) shall, except as provided in sub-section (6), apply 
as if the share premium account were the paid-up share capital of the Corporation. 

(6) The share premium account referred to in sub-section (5) may be applied by the Corporation— 

(a) towards the issue  of unissued  shares  of  the  Corporation to  members  as  fully  paid-up  bonus 

shares; 

(b) in writing off the expenses of, or the commission paid or discount allowed on, any issue of 

shares or debentures of the Corporation; 

(c) in providing for the premium payable on the redemption of any redeemable preference shares 

or of any debentures or of any securities of the Corporation; or 

(d) for the purchase of its own shares or other securities. 

12 

 
 
 
(7)  The  Corporation  may,  by  a  special  resolution,  reduce  its  paid-up  equity  share  capital  in  the 

following manners, namely:— 

(a) giving of previous notice by the Corporation of the intended reduction to every member, and 

to such class or classes of creditors as the Central Government may, by notification, specify; 

(b) constitution of a committee which shall consist of a chairperson who has been a judge of a 
High Court or the chairperson of a tribunal and such independent experts not exceeding two as the 
Board may appoint, to consider representations, if any, that may be made by members and creditors 
referred to in clause (a) in respect of the intended reduction and to submit its recommendations to the 
Board; and 

(c) after consideration of the committee’s recommendations, making of recommendations by the 
Board  for  reduction,  either  as  given  in  the  notice  or  with  such  modifications  as  the  Board  may 
consider necessary, to the Central Government for its approval. 

(8)  Without  prejudice  to  the  generality  of  the  power  under  sub-section  (7),  the  Corporation  may 

reduce its paid-up equity share capital by— 

(a) extinguishing or reducing the liability on any of its equity shares in respect of share capital not 

paid-up; or 

(b)  cancelling,  with  or  without  extinguishing  or  reducing  liability  on  any  of  its  paid-up  equity 
shares, any paid-up equity share capital which is either lost or is unrepresented by available assets; or 

(c)  paying  off,  with  or  without  extinguishing  or  reducing  liability  on  any  of  its  paid-up  equity 

shares, any paid-up equity share capital which is in excess of the wants of the Corporation. 

(9) Notwithstanding anything contained in any other law for the time being in force-- 

(a) regarding various categories of persons in favour of whom an issuer may make reservations 
on  a  competitive  basis,  in  relation  to  a  public  issue,  the  Corporation  may,  at  any  time  during  the 
period  of  five  years  from  the  commencement  of section  131 of  the  Finance  Act,  2021,  make  a 
reservation on a competitive basis, to an extent of up to ten per cent. out of the issue size, in favour of 
its life insurance policyholders as one of the reserved categories for such public issue: 

Provided that the value of the allotment of equity shares to such a policyholder shall not exceed 

two lakh rupees, or such higher amount as the Central Government may by notification specify: 

Provided further that, in the event of under-subscription in the policyholder reservation portion, 
the unsubscribed portion may be allotted on a proportionate basis, in excess of the value referred to in 
the first proviso, subject to the total allotment to a policyholder not exceeding five lakh rupees or such 
higher amount as the Central Government may by notification specify: 

Provided also that the policyholders in favour of whom reservation is made under this sub-section 
may be offered shares at a price not lower than by more than ten per cent. of the price at which net 
offer to public is made to other categories of applicants; 

(b) regarding ineligibility for computation of minimum promoter’s contribution, in relation to a 
public issue by way of an initial public offer, all equity shares of the Corporation held by the Central 
Government, including all shares acquired during the period of three years preceding the opening of 
such public offer, resulting from a bonus issue or otherwise, shall be eligible for such computation; 

(c) requiring the holding of paid-up equity shares by the sellers for a minimum holding period as 
a condition for offering such shares for sale to the public, in relation to a public issue by way of an 
initial public offer, all fully paid-up equity shares of the Corporation held by the Central Government 
shall be eligible for such an offer for sale: 

Provided  that  and  subject  to  any  regulation  made  by  the  Securities  and  Exchange  Board,  no 
shares issued by the Corporation against revaluation of assets or by utilisation of revaluation reserves 
or from unrealised profits shall be eligible for computation of minimum promoter’s contribution and 
for offer for sale in relation to a public issue by way of initial public offer. 

13 

 
Explanation. —Words and expressions used in this sub-section but not defined either in this Act 
or  in  the  Insurance  Act  or  in  the  Companies  Act  shall  have  the  meanings  respectively  assigned  to 
them  in  regulations  made  by  the  Securities  and  Exchange  Board  regarding  issue  of  capital  and 
disclosure requirements, to the extent not repugnant with the provisions of this Act. 

(10)  The  Corporation  may  issue  other  securities,  including  bonds,  debentures,  notes,  commercial 

paper and other debt instruments, for the purpose of raising funds to meet its business requirements.  

5A.  Transferability  of  shares.—(1)  Save  as  otherwise  provided  in  sub-sections  (2)  and  (3),  the 

shares of the Corporation shall be freely transferable: 

Provided that any arrangement between two or more persons in respect of transfer of shares shall be 

enforceable as a contract. 

(2) Nothing contained in sub-section (1) shall entitle the Central Government to transfer any shares 
held by it in the Corporation, if as a result of such transfer, the shares held by it, on a fully diluted basis, 
shall reduce to less than fifty-one per cent. of the issued equity share capital of the Corporation. 

(3)  No  person,  other  than  the  Central  Government,  acting  individually  or  with  persons  acting  in 
concert with such person, or constituents of a group, shall hold equity share in excess of five per cent. of 
issued equity share capital of the Corporation, or such higher percentage as the Central Government may 
by notification specify. 

Explanation.—For the purposes of this section,— 

(a) the expression “group” shall have the meaning assigned to it in the Competition Act, 2002 (12 

of 2003); 

(b) the expression “persons acting in concert” shall have the meaning assigned to it in regulations 
made by the Securities and Exchange Board regarding substantial acquisition of shares and takeovers. 

5B. Register of members, etc.—(1) The Corporation shall keep and maintain the following registers, 

in such form and in such manner as may be specified by regulations, namely: — 

(a) register of members, indicating separately each class of equity and preference shares held by 

each member residing in or outside India; 
(b) register of debenture-holders; and 
(c) register of any other security holders. 

(2)  Every  register  maintained  under  sub-section  (1)  shall  include  an  index  of  the  names  included 

therein. 

(3) The register and index of beneficial owners maintained by a depository under section 11 of the 
Depositories Act, 1996 (22 of 1996) shall be deemed to be the corresponding register and index for the 
purposes of this Act. 

(4) No notice of any trust, whether express or implied or constructive, shall be entered on the register 

of members or be receivable by the Corporation: 

Provided that nothing in this section shall apply to a depository in respect of shares held by it as a 

registered owner on behalf of the beneficial owners. 

Explanation.—For  the  purposes  of  this  section and  section  5C,  the  expressions  “beneficial  owner”, 
“depository” and “registered owner” shall have the meanings respectively assigned to them in clauses (a), 
(e) and (j) of sub-section (1) of section 2 of the Depositories Act, 1996 (22 of 1996). 

5C.  Declaration  in  respect  of  beneficial  interest  in  shares.—(1)  Where  the  name  of  a  person  is 
entered on the register of members of the Corporation as the holder of shares in the Corporation but he 
does  not  hold  beneficial  interest  in  such  shares,  such  person  shall  make,  within  such  time  and  in  such 
form  as  may  be  prescribed  for  a company  under  section  89  of  the  Companies Act,  a  declaration  to  the 
Corporation specifying the name and other particulars of the person who holds beneficial interest in such 
shares. 

14 

 
(2) Every person who holds or acquires a beneficial interest in shares of the Corporation shall make, 
within such time and in such form as may be prescribed for a company under section 89 of the Companies 
Act,  a  declaration  to  the  Corporation  specifying  the  nature  of  his  interest,  particulars  of  the  person  in 
whose name the share stands registered in the books of the Corporation and such other particulars as may 
be prescribed under the said section. 

(3)  Where  any  change  occurs  in  the  beneficial  interest  in  shares  of  the  Corporation,  the  person 
referred to in sub-section (1) and the beneficial owner specified in sub-section (2) shall, within a period of 
thirty  days  from  the  date  of  such  change,  make  a  declaration  to  the  Corporation  in  such  form  and 
containing such particulars as may be prescribed for a company under section 89 of the Companies Act. 

(4) No right in relation to any share in respect of which a declaration is required to be made under this 
section  but  has  not  been  made  by  the  beneficial  owner,  shall  be  enforceable  by  him  or  by  any  person 
claiming through him. 

(5)  For  the  purposes  of  this  section,  beneficial  interest  in  a  share  includes,  directly  or  indirectly, 
through any contract, arrangement or otherwise, the right or entitlement of a person alone or together with 
any other person to— 

(a) exercise or cause to be exercised any or all of the rights attached to such share; or 
(b) receive or participate in any dividend or other distribution in respect of such share. 

(6) Every individual who, acting alone or together or through one or more persons, holds beneficial 
interests,  of  not  less  than  twenty-five  per  cent.  or  such  other  percentage  as  may  be  prescribed  for  a 
company under section 90 of the Companies Act, in the shares of the Corporation or the right to exercise, 
or  the  actual  exercising  of  significant  influence  or  control  as  defined  in  clause  (27)  of  section  2  of  the 
Companies Act, over the Corporation (herein referred to as “significant beneficial owner”), shall make a 
declaration to the Corporation, specifying the nature of his interest and other particulars, in such manner 
and within such period of acquisition of the beneficial interest or rights and any change thereof, as may be 
prescribed for a company under section 90 of the Companies Act. 

(7) The Corporation shall maintain a register of the interest declared by individuals under sub-section 
(6) and changes therein, which shall include the name of individual, his date of birth, address, details of 
ownership in the Corporation and such other details as may be prescribed for a company under section 90 
of the Companies Act. 

5D.  Shares  to  be  securities.—Notwithstanding  anything  contained  in  the  Securities  Contracts 
(Regulation)  Act,  1956  (42  of  1956)  or  any  other  law  for  the  time  being  in  force,  the  shares  of  the 
Corporation shall be deemed to be securities as defined under the said Act. 

5E.  Right  of  registered  members  to  nominate.—(1)  Every  individual  registered  member  may,  at 
any  time,  nominate,  in  such  manner  as  may  be  specified  by  regulations,  an  individual  to  whom  all  his 
rights in the shares shall vest in the event of death of such member. 

(2) Where the shares are registered in the name of more than one individual jointly, the joint holders 
may  together  nominate,  in  such  manner  as  may  be  specified  by  regulations,  an  individual  to  whom  all 
their rights in the shares shall vest in the event of the death of all such joint holders. 

(3) Notwithstanding anything contained in any other law for time being in force or in any disposition, 
whether testamentary or otherwise, where a nomination in respect of shares is made and which purports to 
confer on the nominee the right to vest the shares, the nominee shall, on the death of the member or, as 
the case may be, on the death of all the joint holders, become entitled to all the rights of the member or, as 
the case may be, of all the joint holders, in relation to such shares, and all other persons shall be excluded 
unless the nomination has been varied or cancelled before death in such manner as may be specified by 
regulations. 

(4) Where the nominee is a minor, it shall be lawful for the individual registered holder of the shares 
to make nomination to appoint, in such manner as may be specified by regulations, any person to become 
entitled to the shares in the event of his death during the minority of the nominee.] 

15 

 
 
CHAPTER III 
FUNCTIONS OF THE CORPORATION 

6. Functions of the Corporation.—(1) Subject to the rules, if any, made by the Central Government 
in this behalf, it shall be the general duty of the Corporation to carry on life insurance  business, whether 
in or outside India, and the Corporation shall so exercise its powers under this Act as to secure that life 
insurance business is developed to the best advantage of the community. 

(2) Without prejudice to the generality of the provisions contained in sub-section (1) but subject to the 

other provisions contained in this Act, the Corporation shall have power— 

(a) to carry on capital redemption business, annuity certain business or reinsurance business in so 

far as such reinsurance business appertains to life insurance business; 

(b) subject to the rules, if any, made by the Central Government in this behalf, to invest the funds 
of the Corporation in such manner as the Corporation may think fit and to take all such steps as may 
be  necessary  or  expedient  for  the  protection  or  realisation  of  any  investment;  including  the  taking 
over  of  and  administering  any  property  offered  as  security  for  the  investment  until  a  suitable 
opportunity arises for its disposal; 

(c) to acquire, hold and dispose of any property for the purpose of its business; 

(d) to transfer the whole or any part of the life insurance business carried on outside India to any 

other person or persons, if in the interest of the Corporation it is expedient so to do; 

(e) to advance or lend money upon the security of any movable property or otherwise; 

(f) to borrow or raise any money in such manner and upon such security as the Corporation may 

think fit; 

(g)  to  carry  on  either  by  itself  or  through  any  subsidiary  any  other  business  in  any  case  where 
such other business was being carried on by a subsidiary of an insurer whose controlled business has 
been transferred to and vested in the Corporation under this Act; 

(h)  to  carry  on  any  other  business  which  may  seen  to  the  Corporation  to  be  capable  of  being 
conveniently carried on in connection with its business and calculated directly or indirectly to render 
profitable the business of the Corporation; 

(i) to do all such things as  may be incidental or conducive to the proper exercise of any of the 

powers of the Corporation. 

(3)  In  the  discharge  of  any  of  its  functions  the  Corporation  shall  act  so  far  as  may  be  on  business 

principles. 

1[6A. Power to impose conditions, etc.—(1) In entering into any arrangement, under section 6, with 
any  concern,  the  Corporation  may  impose  such  conditions  as  it  may  think  necessary  or  expedient  for 
protecting the interest of the Corporation and for securing that the accommodation granted by it is put to 
the best use by the concern. 

(2)  Where  any  arrangement  entered  into  by  the  Corporation  under  section  6  with  any  concern 
provides for the appointment by the Corporation of one or more directors of such concern, such provision 
and any appointment of directors made in pursuance thereof shall be valid and effective notwithstanding 
anything to the contrary contained in the Companies Act, 1956 (1 of 1956), or in any other law for the 
time being in force or in the memorandum, articles of association or any other instrument relating to the 
concern,  and  any  provision  regarding  share,  qualification,  age  limit,  number  of  directorships,  removal 
from office of directors and such like conditions contained in any such law or instrument aforesaid, shall 
not apply to any director appointed by the Corporation in pursuance of the arrangement as aforesaid. 

(3) Any director appointed as aforesaid shall— 

(a) hold office during the pleasure of the Corporation and may be removed or substituted by any 

person by order in writing by the Corporation; 

1. Ins. by 52 of 1975, s. 41 (w.e.f. 16-2-1976). 

16 

 
                                                           
(b) not incur any obligation or liability by reason only of his being a director or for anything done 
or omitted to be done in good faith in the discharge of his duties as a director or anything in relation 
thereto; 

(c) not be liable to retirement by rotation and shall not be taken into account for computing the 

number of directors liable to such retirement.] 

CHAPTER IV 
TRANSFER OF EXISTING LIFE INSURANCE BUSINESS TO THE CORPORATION 

7. Transfer of assets and liabilities of existing insurers carrying on controlled business.—(1) On 
the appointed day there shall be transferred to and vested in the Corporation all the assets and liabilities 
appertaining to the controlled business of all insurers. 

(2)  The  assets  appertaining  to  the  controlled  business  of  an  insurer  shall  be  deemed  to  include  all 
rights  and  powers,  and  all  property,  whether  movable  or  immovable,  appertaining  to  his  controlled 
business,  including,  in  particular,  cash  balances,  reserve  funds,  investments,  deposits  and  all  other 
interests and rights in or arising out of such property as may be in the possession of the insurer and all 
books of account or documents relating to the controlled business of the insurer; and liabilities shall be 
deemed to include all debts, liabilities and obligations of whatever kind then existing and appertaining to 
the controlled business of the insurer. 

Explanation.—The expression “assets appertaining to the controlled business of an insurer”— 

(a) in relation to  a  composite  insurer, includes  that  part of the paid-up  capital of  the  insurer or 
assets  representing  such  part  which  has  or  have  been  allocated  to  the  controlled  business  of  the 
insurer in accordance with the rules made in this behalf; 

(b)  in  relation  to  a  Government,  means  the  amount  lying  to  the  credit  of  that  business  on  the 

appointed day. 

(3) Where any such assets are subject to any trust referred to in sub-section (6) of section 27 of the 
Insurance Act or to any other trust for the benefit of policy-holders, the assets shall be deemed to have 
vested in the Corporation free from any such trust. 

8.  Provident,  superannuation  and  other  like  funds.—(1)  Where  an  insurer  whose  controlled 
business is to be transferred to and vested in the Corporation under section 7, has established a provident 
or superannuation fund or any other like fund for the benefit of his employees and constituted a trust in 
respect  thereof  (hereinafter  in  this  section  referred  to  as  an  existing  trust),  the  moneys  standing  to  the 
credit of any such fund on the appointed day, together with any other assets belonging to such fund, shall, 
subject  to  the  provisions  of  sub-section  (2),  stand  transferred  to  and  vest  in  the  Corporation  on  the 
appointed day free from any such trust. 

(2) Where all the employees of any such insurer do not become employees of the Corporation under 
section 11, the moneys and other assets belonging to any such fund as it referred to in sub-section (1), 
shall be apportioned between the trustees of the fund and the Corporation in the prescribed manner; and in 
case of any dispute regarding such apportionment, the decision of the Central Government thereon shall 
be final. 

(3)  The  Corporation  shall,  as  soon  as  may  be  after  the  appointed  day,  constitute  in  respect  of  the 
moneys and other assets which are transferred to and vested in it under this section, one or more trusts 
having objects as similar to the objects of the existing trusts as in the circumstances may be practicable. 

(4) Where all the moneys and other assets belonging to an existing trust are transferred to and vested 
in  the  Corporation  under  this  section,  the  trustees  of  such  trust,  shall  as  from  the  appointed  day,  be 
discharged from the trust, expect as respects things done or omitted to be done before the appointed day. 

9. General effect of vesting of controlled business.—(1) Unless otherwise expressly provided by or 
under  this  Act, all  contracts,  agreements and other instruments  of  whatever  nature subsisting  or  having 
effect immediately before the appointed day and to which an insurer whose controlled business has been 
transferred to and vested in the Corporation is a party or which are in favour of such insurer shall in so far 

17 

 
as they relate to the controlled business of the insurer be of as full force and affect against or in favour of 
the  Corporation,  as the  case  may  be,  and  may  be  enforced  or  acted  upon  as fully  and  effectually  as  if, 
instead  of  the  insurer,  the  Corporation  had  been  a  party  thereto  or  as  if  they  had  been  entered  into  or 
issued in favour of the Corporation. 

(2) If on the appointed day any suit, appeal or other legal proceeding of whatever nature is pending by 
or  against  an  insurer,  then,  in  so  far  as  it  relates  to  his  controlled  business,  it  shall  not  abate,  be 
discontinued or be in any way prejudicially affected by reason of the transfer to the Corporation of the 
business of the insurer or anything done under this Act, but the suit, appeal or other proceeding may be 
continued, prosecuted and enforced by or against the Corporation. 

10. Provisions as to composite insurers.—(1) For the removal of doubts it is hereby declared that in 
any case where an insurer whose controlled business has been transferred to an vested in the corporation 
under  this  Act  is  a  composite  insurer,  the  provisions  of  the  preceding  sections  shall  only  apply  to  the 
extent to which any property appertains to his controlled business and to rights and powers acquired, and 
to debts, liabilities and obligations incurred, and to contracts, agreements and other instruments made by 
the insurer for the purposes of his controlled business and to legal proceedings relating to those purposes, 
and the provisions of those sections shall be construed accordingly. 

(2) The Central Government may, by rules made in this behalf provide— 

(a)  for  the  determination  of  the  question  whether  any  property  appertains  to  his  controlled 
business or whether any rights, powers, debts, liabilities or obligations were acquired or incurred or 
any  contract,  agreement  or  other  instrument  was  made  by  the  insurer  for  the  purposes  of  his 
controlled business or whether any documents relate to those purposes; 

(b) for the allocation of the paid-up capital or assets representing such paid-up capital, as the case 

may be, between the controlled business of the insurer and any other business; 

(c) for substituting for any agreements entered into by any insurer partly  for the purposes of his 
controlled business and partly for other purposes separate agreements in the requisite terms and for 
any apportionments and indemnities consequent thereon; 

(d) for the severance of leases comprising property of which part only is transferred to and vested 

in the Corporation by virtue of this Act and for apportionment consequent on such severance; 

(e)  for  the  apportionment  and  the  making  of  financial  adjustments  with  respects  to  any  debts, 
liabilities of obligations incurred by any such insurer partly for the purposes of his controlled business 
and partly for other purposes and for any necessary variation of mortgages and encumbrances relating 
to such debts, liabilities or obligations; 

(f)  for  the  apportionment  of  the  moneys  and  other  assets  belonging  to  any  provident  or 
superannuation fund or any other like fund to which the provisions of section 8 do not apply between 
persons employed in connection with the controlled business of an insurer and other persons; 

(g)  for  any  other  matters  supplementary  to  or  consequential  on  the  matters  aforesaid  for  which 

provision appears to be necessary or expedient. 

(3) All rules made under this section shall be laid for not less than thirty days before both Houses of 
Parliament  as  soon  as  possible  after  they  are  made,  and  shall  be  subject  to  such  modifications  as 
Parliament may make during the session in which they are so laid or the session immediately following. 

(4)  Where  at  any  time  before  the  expiration  of  six  months  from  the  appointed  day  a  question  has 
arisen under this section or under any rules made thereunder as to whether any property is or was held or 
used  by  the  insurer  for  the  purposes  of  his  controlled  business,  the  question  shall  be  referred  to  the 
Tribunal for decision. 

11.  Transfer  of  service  of  existing  employees  of  insurers  to  the  Corporation.—(1)  Every       

whole-time employee of an insurer whose controlled business has been transferred to and vested in the 
Corporation  and  who  was  employed  by  the  insurer  wholly  or  mainly  in  connection  with  his  controlled 
business  immediately  before  the  appointed  day  shall,  on  and  from  the  appointed  day,  become  an 
employee  of  the  Corporation,  and  shall  hold  his  office  therein  by  the  same  tenure,  at  the  same 

18 

 
remuneration  and  upon  the  same  terms  and  conditions  and  with  the  same  rights  and  privileges  as  to 
pension and gratuity and other matters as he would have held the same on the appointed day if this Act 
had not been passed, and shall continue to do so unless and until his employment in the Corporation is 
terminated or until his remuneration, terms and conditions are duly altered by the Corporation: 

Provided  that  nothing  contained  in  this  sub-section  shall  apply  to  any  such  employee  who  has,  by 
notice in writing given to the Central Government prior to the appointed day, intimated his intention of 
not becoming an employee of the Corporation. 

1[(2)  Where  the  Central  Government  is  satisfied  that  for  the  purpose  of  securing  uniformity  in  the 
scales of remuneration and the other terms and conditions of service applicable to employees of insurers 
whose controlled business has been transferred to, and  2[vested in the Corporation], it is necessary so to 
do,  or  that,  in  the  interests  of  the  Corporation  and  its  policy-holders,  a  reduction  in  the  remuneration 
payable, or a revision of the other terms and conditions of service applicable, to employees or any class of 
them is called for, the Central Government may, notwithstanding anything contained in sub-section (1), or 
in the Industrial Disputes Act, 1947 (14 of 1947), or in any other law for the time being in force, or in any 
award,  settlement  or  agreement  for  the  time  being  in  force,  alter  (whether  by  way  of  reduction  or 
otherwise) the remuneration and the other terms and conditions of service to such manner as it thinks fit; 
and if the alteration is not acceptable to any employee, the Corporation may terminate his employment by 
giving  him  compensation  equivalent  to  three  months  remuneration  unless  the  contract  of  service  with 
such employee provides for a shorter notice of termination. 

Explanation.—The compensation payable to an employee under this sub-section shall be in addition 
to,  and  shall  not  affect,  any  pension,  gratuity  provident  fund  money  or  any  other  benefit  to  which  the 
employee may be entitled under his contract of service.] 

(3) If any question arises as to whether any person was a whole time employee of an insurer or as to 
whether any employee was employed wholly or mainly in connection with the controlled business of an 
insurer immediately  before  the  appointed  day  the  question  shall  be  referred  to the  Central  Government 
whose decision shall be final. 

(4) Notwithstanding anything contained in the Industrial Disputes Act, 1947 (14 of 1947), or in any 
other  law  for  the  time  being  in  force,  the  transfer  of  the  services  of  any  employee  of  an  insurer  to  the 
Corporation shall not entitle any such employee to any compensation under that Act or other law, and no 
such claim shall be entertained by any court, tribunal or other authority. 

12. Transfer of services of existing employees of chief agents of insurers to the Corporation in 
certain  cases.—Subject  to  such  rules  as  the  Central  Government  may  make  in  this  behalf,  every       
whole-time  salaried  employee  of  a  chief  agent  of  an  insurer  whose  controlled  business  has  been 
transferred to and vested in the Corporation and,— 

(a)  who  was  employed  by  the  chief  agent  wholly  or  mainly  in  connection  with  the  controlled 

business of the insurer; 

(b) whose salary on the appointed day did not exceed five hundred rupees per mensem; and 

(c) who was in the employment of the chief agent for a continuous period of not less than one 

year immediately before the appointed day; 

shall,  on  and  from  the  appointed  day,  become,  an  employee  of  the  Corporation  and  the  provisions  of 
section  11  shall,  so  far  as  may  be,  apply  in  relation  to  such  employee  as  they  apply  in  relation  to  a             
whole-time employee of the insurer: 

Provided  that  this  section  shall  not  apply  except  in  cases  where  the  chief  agent  of  the  insurer  was 
required under the terms of his contract with the insurer to render the prescribed services to policy holders 
of the insurer. 

1. Subs. by Act 17 of 1957, s. 2, for sub-section (2) (w.e.f. 6-6-1957). 
2. Subs. by Act 36 of 1957, s. 2 and the First Schedule, for “vested in it” (w.e.f. 17-9-1957). 

19 

 
                                                           
Explanation.—In  the  case  of  a  whole-time  salaried  employee  of  a  chief  agent  who  has  been 
retrenched by the chief agent on or after the 19th day of January, 1956, the provisions of this section shall 
apply as if for the words ‘the appointed day’ the words and figures ‘the 19th day of January, 1956’ had 
been substituted. 

13.  Duty  to  deliver  possession  of  property  and  documents  relating  thereto.—(1)  Where  any 
property  appertaining  to  the  controlled  business  of  an  insurer  has  been  transferred  to  and  vested  in  the 
Corporation under this Act, then,— 

(a) every person, in whose possession, custody or control any such property may be, shall deliver 

the property to the corporation forthwith; 

(b) any person who, on the appointed day, has in his possession, custody or control any books, 
documents or other papers relating to such controlled business shall be liable to account for the said 
books, documents and papers to the Corporation, and shall deliver them to the Corporation or to such 
person as the Corporation may direct. 

(2) In particular, all the assets of an insurer appertaining to life insurance business held in deposit by 
the  Reserve  Bank  of  India  under  the  Insurance  Act  or  by  trustees  in  trust  shall  be  delivered  to  the 
Corporation. 

(3)  Without  prejudice  to  the  other  provisions  contained  in  this  section,  it  shall  be  lawful  for  the 
Corporation  to  take  all  necessary  steps  for  securing  possession  of  all  properties  which  have  been 
transferred to and vested in it under this Act. 

14. Power of Corporation to modify contracts of life insurance in certain cases.—The corporation 
may,  having  regard  to  the  financial  condition  on  the  appointed  day  of  any  insurer  whose  controlled 
business  has  been  transferred  to  an  vested  in  the  Corporation,  reduce  the  amounts  of  insurance  under 
contracts  of  life  insurance  entered  into  by  such  insurer  before  the  19th  day  of  January,  1956,  in  such 
manner and subject to such conditions as it thinks fit: 

Provided that no such reduction shall be made except in accordance with a scheme prepared by the 

Corporation in this behalf and approved by the Central Government. 

15.  Right  of  Corporation  to  seek  relief  in  respect  of  certain  transactions  of  the  insurer.—(1) 
Where an insurer whose controlled business has been transferred to and vested in the Corporation under 
this Act has, at any time within five years before the 19th day of January, 1956,— 

(a) made any payment to any person without consideration; 

(b)  sold  or  disposed  of  any  property  of  the  insurer  without  consideration  or  for  an  inadequate 

consideration; 

(c) acquired any property or rights for an excessive consideration; 

(d) entered into or varied any agreement so as to require an excessive consideration to be paid or 

given by the insurer; 

(e) entered into any other transaction of such an onerous nature as to cause a loss to, or impose a 

liability on, the insurer exceeding any benefit accruing to the insurer; 

(f)  if  a  composite  insurer,  transferred  any  property  from  his  life  department  to  his  general 

department without consideration or for an inadequate consideration; 

and the payment, sale, disposal, acquisition, agreement or variation thereof or other transaction or transfer 
was not reasonably necessary for the purpose of the controlled business of the insurer or was made with 
an  unreasonable  lack  of  prudence  on  the  part  of  the  insurer,  regard  being  had  in  either  case  to  the 
circumstances  at  the  time,  the  Corporation  may  apply  for  relief  to  the  Tribunal  in  respect  of  such 
transaction, and all parties to the transaction shall, unless the Tribunal otherwise directs, be made parties 
to the application. 

20 

 
(2) The Tribunal may make such order against any of the parties to the application as it thinks just 
having  regard  to  the  extent  to  which  those  parties  were  respectively  responsible  for  the  transaction  or 
benefited from it and all the circumstances of the case. 

(3) Where an application is made to the Tribunal under this section is respect of any transaction and 
the application is determined in favour of the Corporation, the Tribunal shall have exclusive jurisdiction 
to determine any claims outstanding in respect of the transaction. 

16. Compensation for acquisition of controlled business.—(1) Where the controlled business of an 
insurer has been transferred to and vested in the Corporation under this Act, compensation shall be given 
by the Corporation to that insurer in accordance with the principles contained in the First Schedule. 

(2) The amount of the compensation to be given in accordance with the aforesaid principles shall be 
determined by the Corporation in the first instance, and if the amount so determined is approved by the 
Central Government it shall be offered to the insurer in full satisfaction of the compensation payable to 
him under this Act, and if, on the other hand, the amount so offered is not acceptable to the insurer he 
may within such time as may be prescribed for the purpose have the matter referred to the Tribunal for 
decision. 

17.  Constitution  of  Tribunals.—(1)  The  Central  Government  may  for  the  purposes  of  this  Act 
constitute one or more Tribunals and each of the Tribunals shall consist of three members appointed by 
the Central Government one of whom shall be a person who is, or has been, a Judge of a High Court or 
has been a Judge of the Supreme Court, and he shall be the Chairman thereof. 

(2) A Tribunal may choose one or more persons possessing special knowledge of any matter relating 
to any case under inquiry to assist the Tribunal in determining any question which has to be decided by it 
under this Act. 

(3) Every Tribunal shall have the powers of a civil court while trying a suit under the Code of Civil 

Procedure, 1908 (5 of 1908), in respect of the following matters:— 

(a) summoning and enforcing the attendance of any person and examining him on oath; 

(b) requiring the discovery and production of documents; 

(c) receiving evidence on affidavits; 

(d) issuing commissions for the examination of witnesses or documents. 

(4) Every Tribunal shall have power to regulate its own procedure and decide all matters within its 
competence, and may review any of its decisions in the event of there being a mistake on the face of the 
record or correct any arithmetical or clerical error therein. 

CHAPTER V 
MANAGEMENT 

18. Offices, branches and agencies.—(1) The central office of the Corporation shall be at such place 

as the Central Government may, by notification in the Official Gazette, specify. 

(2) The Corporation shall establish a zonal office at each of the following places, namely, Bombay, 
Calcutta,  Delhi,  Kanpur  and  Madras,  and,  subject to  the  previous  approval  of  the  Central  Government, 
may establish such other zonal offices as it thinks fit. 

(3) The territorial limits of each zone shall be such as may be specified by the Corporation. 

1[(4) There  may  be  established  as  many  divisional  offices  and  branches  in  each  zone  as  may  be 
decided  by  the  Corporation  in  accordance  with  the  guidelines  issued  by  the  Insurance  Regulatory  and 
Development  Authority  established  under  the  Insurance  Regulatory  and  Development  Authority           
Act, 1999 (41 of 1999) in this regard.] 

1. Subs. by Act 8 of 2012, s. 3, for sub-section (4) (w.e.f. 31-3-2012). 

21 

 
                                                           
1[19.  Executive  Committee.—(1)  The  Board  may  constitute  an  Executive  Committee  of  the 

Board, consisting of— 

(i) the Chief Executive; 
(ii) Managing Directors; 
(iii) the director referred to in clause (d) of sub-section (2) of section 4; and 

(iv) four directors nominated by the Board from amongst the directors referred to in clauses (e), 

(f) and (g) of sub-section (2) of section 4. 
(2) The Executive Committee of the Board shall exercise such powers as the Board may entrust to it. 

19A.  Investment  Committee.—The  Board  may,  for  such  functions  relating  to  investment  of  the 
funds  of  the  Corporation  as  the  Board  may  entrust,  constitute  an  Investment  Committee  of  the  Board, 
consisting of the Chief Executive and not more than seven other directors, of which a minimum two shall 
be directors other than directors appointed under clause (a) or clause (b) of sub-section (2) of section 4: 

Provided  that  the  officers  of  the  Corporation  heading  the  functions  dealing  with  finance,  risk, 
investment and law as well as its Appointed Actuary shall be invited to every meeting of the Committee 
and shall have a right to be heard at the meeting. 

Explanation.—For  the  purposes  of  this  section  and  section  24B,  “Appointed  Actuary”  means  the 
actuary  appointed  as  such  by  the  Corporation  under  the  regulations  made  by  the  Authority  under  the 
Insurance Act regarding appointed actuaries. 

19B.  Nomination  and  Remuneration  Committee.—(1)  The  Board  shall  constitute  a  Nomination 
and Remuneration Committee of the Board, consisting of three or more directors from amongst directors 
other than those appointed either under sub-clause (i) of clause (a) or under clause (b) or under clause (c) 
of sub-section (2) of section 4, out of whom not less than one-half shall be independent directors at any 
time when the number of independent directors in office is sufficient to constitute such proportion of the 
membership of the Committee: 

Provided that the Chairperson may be appointed as a member of the Nomination and Remuneration 

Committee but shall not chair the Committee: 

Provided  further  that  in  the  event  of  the  Corporation  applying  to  list  its  equity  shares  under  any 
regulation made by the Securities and Exchange Board in this behalf, the Corporation shall ensure that the 
proportion  of  independent  directors  on  the  Nomination  and  Remuneration  Committee  shall  be  in 
accordance with the requirements as provided under those regulations. 

(2) The Nomination and Remuneration Committee shall— 

(i) formulate the criteria for determining qualifications, positive attributes and independence of a 
director to be appointed under clause (e) or clause (f) or clause (g) of sub-section (2) of section 4 and 
recommend the same to the Board; 

(ii) in accordance with the criteria referred to in clause (i), identify individuals who are qualified 

to be appointed as such a director: 

Provided  that  while  identifying  individuals,  the  Committee  shall  have  due  regard  to  the 

requirements under the proviso to sub-section (1) of section 19C; 

(iii)  give  its  recommendations  to  the  Board  regarding  appointment  and  removal  of  such  an 

individual, and carry out evaluation of his performance; and 

(iv)  recommend  to  the  Board  a  policy  relating  to  the  sum  payable  as  sitting  fees  to  a  director 
nominated or appointed under clauses (e) or (f) or (g) of sub-section (2) of section 4, subject to such 
fees  not  exceeding  such  limit  as  may  apply  in  respect  of  sitting  fees  payable  to  a  director  of  a 
company under the Companies Act. 

1. Subs. by Act 13 of 2021, s. 132, for section 19 (w.e.f. 30-6-2021). 

22 

 
                                                           
19C.  Audit  Committee.—(1)  The  Board  shall  constitute  an  Audit  Committee  of  the  Board, 
consisting  of  a  minimum  of  three  directors  with  independent  directors  forming  a  majority  when  the 
number of independent directors in office is sufficient to constitute such proportion of the membership of 
the Audit Committee: 

Provided  that  a  majority  of  directors  on  the  Audit  Committee,  including  its  chairperson,  shall  be 
individuals with ability to read and understand financial statements and at least one individual shall have 
accounting or related financial management expertise: 

Provided  further  that  in  the  event  of  the  Corporation  applying  to  list  its  equity  shares  under  any 
regulation made by the Securities and Exchange Board in this behalf, the Corporation shall ensure that the 
proportion of independent directors on the Audit Committee shall be in accordance with the requirements 
as provided under those regulations. 

(2) The Audit Committee shall act in accordance with the terms of reference specified by the Board, 

which shall include, inter alia,— 

(a) recommendations for appointment, remuneration and terms of appointment of the auditors of 

the Corporation; 

(b)  review  and  monitoring  of  the  independence  and  performance  of  the  auditors,  and  the 

effectiveness of the audit process; 

(c) examination of financial statements and auditor’s report thereon; 

(d) prior approval of transactions of the Corporation with related parties: 

Provided  that  the  Audit  Committee  may  make  omnibus  approval  for  related  party  transactions 

proposed to be entered into by the Corporation subject to the conditions specified in sub-section (3): 

Provided further that in case of transaction other than transactions referred to in section 4C, and 
where the Audit Committee does not approve a transaction, it shall make its recommendations to the 
Board: 

Provided also that in case any transaction involving any amount not exceeding one crore rupees is 
entered into by a director or an officer of the Corporation without obtaining the approval of the Audit 
Committee  and  it  is  not  ratified  by  the  Audit  Committee  within  three  months  from  the  date  of  the 
transaction, such transaction shall be voidable at the option of the Corporation with the approval of 
the Audit Committee and if the transaction is with the related party to any director or is authorised by 
any other director, the director concerned shall indemnify the Corporation against any loss incurred 
by it; 

(e) scrutiny of inter-corporate loans and investments; 

(f) valuation of undertakings or assets of the Corporation, wherever it is necessary; 

(g) evaluation of internal financial controls and risk management systems; 

(h) monitoring the end use of funds raised through public offers, and related matters. 

(3) The Audit Committee may grant omnibus approval for related party transactions proposed to be 

entered into by the Corporation, subject to the following conditions, namely:-- 

(a) the Audit Committee shall lay down the criteria for granting omnibus approval in line with the 
policy  referred  to  in  sub-section  (2)  of  section  4C  including  in  respect  of  transactions  which  are 
repetitive in nature; 

(b)  the  Audit  Committee  shall  satisfy  itself  that  omnibus  approval  is  needed  and  that  such 

approval is in the interest of the Corporation; 

(c) the omnibus approval shall specify the following, namely:-- 

(i) the details regarding the name of the related party and the nature, period and the maximum 

amount of the transactions that shall be entered into; 

23 

 
(ii)  the  details  regarding  indicative  base  price  or  current  contracted  price,  along  with  the 

formula, if any, for variation in the price; and 

(iii) such other conditions as the Audit Committee may deem fit: 

Provided  that  where  the  need  for  related  party  transaction  cannot  be  foreseen  and  the  said 
details are not available, the Audit Committee may grant omnibus approval for such transactions 
subject to their value not exceeding one crore rupees per transaction; 
(d) the Audit Committee shall review on a quarterly basis, the details of related party transactions 

entered into by the Corporation pursuant to every omnibus approval given; and 

(e) omnibus approval shall be valid for a period not exceeding one year and shall require fresh 

approval after expiry of one year. 
(4) The Audit Committee may call for the comments of the auditors about internal control systems, 
the scope  of  audit including  the  observations of the  auditors,  and  review  of financial  statements  before 
their  submission  to  the  Board,  and  may  also  discuss  any  related  issues  with  the  auditors  and  the 
management of the Corporation. 

(5)  The  Audit  Committee  shall  have  authority  to  investigate  any  matter  in  relation  to  the  items 
specified in sub-section (2) or referred to it by the Board and, for this purpose, shall have the power to 
obtain  professional  advice  from  external  sources  and  have  full  access  to  information  contained  in  the 
records of the Corporation. 

(6) The auditors of the Corporation and such key managerial personnel as the Board may specify shall 

have a right to be heard in the meetings of the Audit Committee when it considers the auditor’s report. 

19D. Other Committees.—The Board may constitute such other Committees of the Board as it may 
deem fit, to render advice to the Board on such matters as may be generally or specially referred to them, 
and to perform such duties as the Board may entrust to them.] 

1[20.  Chief  Executive  and  Managing  Directors.—(1)  The  Chief  Executive  shall,  subject  to  the 
superintendence, control and direction of the Board, be entrusted with substantial powers of management 
in respect of the whole of the affairs of the Corporation. 

(2)  The  Chief  Executive  shall  also  perform  such  other  duties  in  relation  to  the  affairs  of  the 
Corporation as the Board may entrust to him from time to time and shall, for this purpose, exercise such 
powers as may be conferred upon him by the Board: 

Provided  that  the  Board  may  also  empower  the  Chief  Executive  to  entrust  or  delegate  such  of  his 

duties and powers, as it may deem fit. 

(3)  Every  Managing  Director,  subject  to  the  general  control  of  the  Chief  Executive,  shall  perform 
such duties and exercise such powers as may be entrusted or delegated to him by the Board or, under sub-
section (2), by the Chief Executive.] 

21. Corporation to be guided by the directions of Central Government.—In the discharge of its 
functions under this Act, the Corporation shall be guided by such directions in matters of policy involving 
public interest as the Central Government may give to it in writing; and if any question arises whether a 
direction  relates  to  a  matter  of  policy  involving  public  interest  the  decision  of the  Central  Government 
thereon shall be final. 

22.  Zonal  Managers.—(1)  The  Corporation  may  entrust  the  superintendence  and  direction  of  the 
affairs  and  business  of  a  zonal  office  to  2[an  employee  of  the  Corporation  other  than  a  whole-time 
director],  who  shall  be  known  as  the  Zonal  Manager  and  the  Zonal  Manager  shall  perform  all  such 
functions of the Corporation as may be delegated to him with respect to the area within the jurisdiction of 
the zonal office. 

1. Subs. by Act 13 of 2021, s. 133, for section 20 (w.e.f. 30-6-2021). 
2. Subs. by s. 134, for “a person whether a member or not” (w.e.f. 30-6-2021). 

24 

 
                                                           
1* 

* 

* 

* 

* 

(3) The Corporation shall constitute in the prescribed manner for each zonal office an Employees and 
Agents  Relations  Committee  consisting  of  such  number  of  persons  as  it  thinks  fit  and  every  such 
Committee  shall  consist  of  representatives  of  the  Corporation  and  of  its  employees  and  agents,  so 
however, that the number of representatives of the employees and agents on the Committee shall not be 
less than the number of representatives of the Corporation and it shall be duty of the Committee to advise 
the Zonal Manager on matters which relate to the welfare of the employees and agents of the Corporation 
or which are likely to promote and secure amity and good relations between them and the Corporation. 

23. Staff of the Corporation.—(1) For the purpose of enabling it to discharge its functions under this 

Act, the Corporation may employ such number of persons as it thinks fit. 

(2)  Every  person  employed  by  the  Corporation  or  whose  services  have  been  transferred  to  the 

Corporation under this Act, shall be liable to serve anywhere in India. 

2[23A.  Annual  general  meeting  and  other  general  meetings.—(1)  An  annual  general  meeting  or 
other  general  meeting  of  members  shall  be  held  in  each  financial  year  at  such  time  as  the  Board  may 
specify, at the central office of the Corporation or at such other place in India as the Central Government 
may permit on the recommendations of the Board: 

Provided  that  not  more  than  fifteen  months  shall  elapse  between  the  date  of  one  annual  general 

meeting of the Corporation and that of the next: 

Provided  further  that  notwithstanding  anything  contained  in  this  section,  general  meeting  shall  be 
held only when the Corporation has members other than the Central Government who are entitled to vote: 
Provided also that until the first annual general meeting or other general meeting is held, the Board 

shall perform all the functions required to be performed in such meeting. 

(2) The members present at an annual general meeting shall be entitled to— 

(a)  discuss  the  financial  statements  of  the  Corporation  as  referred  to  in  section  24B  and  the 
auditor’s  report  as  referred  to  in  section  25B,  which  shall  be  accompanied  by  the  report  of  the 
Board  as  referred  to  in  section  24C,  and  to  adopt  the  financial  statements,  along  with  all  the 
documents which are required to be attached to such financial statements under this Act; 

(b) discuss and adopt the Annual Report prepared under section 27; 
(c) approve a declaration of dividend under sub-section (1) of section 28B; 

(d) approve the appointment of directors under sub-section (4) of section 4; 

(e)  approve  the  appointment  of  auditors  under  sub-sections  (1)  and  (4)  of  section  25  and  fix 

their remuneration under sub-section (7) of section 25. 

(3) Every member shall be entitled to attend a general meeting, whether in person or by proxy or by 

duly authorised representative: 

Provided that every director shall also be entitled to attend a general meeting, whether in person or 

through electronic means: 

Provided further that all notices of, and other communications relating to, any general meeting shall 
be forwarded to the auditor appointed for the Corporation, and such auditor shall, unless exempted by the 
Corporation,  attend  any  general  meeting  either  in  person  or  through  authorised  representative  who  is 
qualified to be an auditor, and shall have the right to be heard at such meeting on any part of the business 
which concerns him as the auditor. 

1. Sub-section (2) omitted by Act 13 of 2021,  s. 134 (w.e.f. 30-6-2021). 
2. Ins. by s. 135, ibid. (w.e.f. 30-6-2021). 

25 

 
 
 
 
 
 
 
 
 
                                                           
(4) A member who is entitled to vote may exercise his vote at a general meeting in person or by proxy 

or by duly authorised representative. 

(5)  Persons  entitled  to  attend  and  to  exercise  vote  at  a  general  meeting  may  also  do  so  through 

electronic means, and the manner of attendance and exercise of vote shall be such as may be prescribed. 

(6)  No  business  other  than  that  specified  in  sub-section  (2)  shall  be  transacted  or  discussed  at  the 
annual general meeting, except with the consent of the Chairperson, unless not less than six weeks’ notice 
of the same has been given to the Chairperson either by the Central Government or by at least hundred 
members who have the right to vote at the meeting: 

Provided that such a notice shall be in the form of a definite resolution to be put to the meeting, and 

that such resolution shall be included in the notice of the meeting. 

(7)  Save  and  except  with  the  consent  of  the  Chairperson,  no  business  other  than  that  for  which  a 

general meeting has been convened shall be transacted or discussed at the meeting. 

(8)  No  general  meeting  shall  be  proceeded  with  and  no  business  shall  be  transacted  at  any  general 

meeting unless members constitute such quorum as may be prescribed: 

Provided that where a meeting could not be held for want of quorum, it may be adjourned and held in 

such manner as may be prescribed. 

(9) The Corporation shall cause the minutes of all proceedings of general meetings to be entered in 

books kept for that purpose.] 

CHAPTER VI 
FINANCE, ACCOUNTS AND AUDIT 

1[24. Funds of the Corporation.—(1) The Corporation shall have its own fund or funds, and all 
receipts of the Corporation shall be credited thereto and all payments of the Corporation shall be made 
therefrom: 

Provided that the Board may, in relation to any of the funds of the Corporation or otherwise, establish 
reserves  which  may  or  may  not  be  allocated  for  a  specific  purpose,  and  such  sums  as  the  Board  may 
determine, may be transferred to or from such reserves. 

(2) The Board shall, for every financial year after the financial year in which the provisions of section 

136 of the Finance Act, 2021 come into force, cause to be maintained— 

(a) a participating policyholders fund, to which all receipts from participating policyholders shall 

be credited and from which all payments to such policyholders shall be made; and 

(b)  a  non-participating  policyholders  fund,  to  which  all  receipts  from  non-participating 

policyholders shall be credited and from which all payments to such policyholders shall be made: 

Provided that the members, by resolution in a general meeting, may exempt maintenance of such 

funds for one financial year at a time up to two financial years. 

24A. Books of account, etc.---(1) The Corporation shall prepare and keep at its central office books 
of account and other relevant books and records and financial statement for every financial year which 
give a true and fair view of the state of its affairs, including that of its zonal offices, and which explain the 
transactions effected both at the central office and at its zonal offices. 

(2) The Corporation shall prepare and keep at each zonal office of the Corporation, books of account 
and other relevant books and records and financial statement for every financial year which give a true 
and fair view of the state of affairs of every divisional office established in the zone corresponding to such 
zonal office and which explain the transactions effected thereat. 

(3)  The  Corporation  shall  prepare  and  keep  at  each  divisional  office  of  the  Corporation,  books  of 
account and other relevant books and records and financial statement for every financial year which give 

1. Subs.by Act 13 of 2021,  s. 136, for section 24 (w.e.f. 30-6-2021). 

26 

 
                                                           
a  true  and  fair  view  of  the  state  of  affairs  of  every  branch  established under  such  divisional  office  and 
which explain the transactions effected thereat. 

(4) All or any of the books of account and other relevant books and records referred to in sub-section 
(1) or sub-section (2) or sub-section (3) may be kept at such other place or places in India as the Board 
may decide. 

(5) The Corporation shall be deemed to have complied with the provisions of sub-section (1) or sub-
section  (2)  or  sub-section  (3),  in  respect  of  a  zonal  office  or  a  divisional  office,  other  than  the  central 
office, or a branch of the Corporation, whether within or outside India, if proper books of account relating 
to the transactions effected at such office or branch, are kept thereat and proper summarised returns are 
sent  periodically  to  the  central  office  or  the  corresponding  zonal  office  or  the  corresponding  divisional 
office, or to the other place referred to in sub-section (4). 

(6) The books of account and other relevant books and records referred to in sub-section (1) or sub-
section (2) or sub-section (3) may be kept in electronic form, in such manner as the Board may determine. 

(7) The books of account of the Corporation relating to a period of not less than ten financial years 
immediately preceding a financial year, together with the vouchers relevant to any entry in such books of 
account, shall be kept in good order: 

Provided that where the Central Government has appointed a special auditor under section 25D or is 
of the opinion that circumstances exist which render it necessary so to do, it may direct the Corporation 
that the books of account be kept for such longer period as the Central Government may specify. 

24B.  Financial  statements.—(1)  The  financial  statements  of  the  Corporation  shall  give  a  true  and 
fair view of the state of affairs of the Corporation and shall be in conformity with applicable accounting 
requirements as may be applicable for such financial statements: 

Provided that the financial statements shall not be treated as not disclosing a true and fair view of the 
state  of  affairs  of  the  Corporation,  merely  by  reason  of  the  fact  that  they  do  not  disclose  any  matters 
which are not required to be disclosed by this Act or by the Insurance Act or by the Insurance Regulatory 
and Development Authority Act, 1999 (42 of 1999) or by any other law for the time being in force. 

(2) At every annual general meeting, the Board shall place before such meeting financial statements 

for the preceding financial year. 

(3) The Corporation shall, in addition to financial statements provided under sub-section (2), prepare 
a consolidated financial statement of the Corporation in conformity with the requirements referred to in 
sub-section (1), and shall place the same before the annual general meeting, along with the placing of its 
financial statements under sub-section (2): 

Provided  that  the  Corporation  shall  also  attach  along  with  its  financial  statements,  a  separate 

statement containing the salient features of the consolidated financial statement. 

(4)  The  provisions  of  this  Act  applicable  to  financial  statements  under  sub-section  (1)  and  under 
section 24C, the inquiry by the auditor into matters referred to in and making of the auditor’s report on 
accounts under section 25B, and adoption of financial statements under section 23A at the annual general 
meeting, shall, mutatis mutandis, apply to the consolidated financial statement referred to in sub-section 
(3). 

(5) Without prejudice to anything contained in sub-section (1) or sub-section (3), where the financial 
statements are not in conformity with the standards applicable thereto, the Corporation shall disclose in 
the  financial  statements  the  deviation  from  applicable  standards,  the  reasons  therefor  and  the  financial 
effects, if any, arising out of such deviation. 

(6) Financial statements including consolidated financial statement, if any, shall be approved by the 
Board before they are signed on behalf of the Board by two whole-time directors, one director other than 
a  whole-time  director,  the  heads  of  the  finance  and  secretarial  functions  of  the  Corporation  and  its 
Appointed Actuary, for submission to the auditor for his report thereon. 

(7) The auditor’s report shall be attached to every financial statement. 

27 

 
(8)  A  signed  copy  of  every  financial  statement,  including  consolidated  financial  statement,  if  any, 

shall be issued, circulated or published, along with a copy each of— 

(a) any notes annexed to or forming part of such financial statement; 

(b) the auditor’s report; and 

(c) the Board’s report referred to in sub-section (1) of section 24C. 

24C.  Board’s  report.—(1)  There  shall  be  attached  to  financial  statements  placed  before  general 

meeting, a report by the Board, which shall include— 

(a) number of meetings of the Board; 

(b) a Directors’ Responsibility Statement; 

(c) details in respect of frauds reported by auditors; 

(d) a statement on declarations given by independent directors under the second proviso to sub-

section (3) of section 4; 

(e)  the  Corporation’s  policy  on  directors’  appointment,  including  the  criteria  for  determining 
qualifications, positive attributes and independence of a director, which are referred to in section 19B; 

(f) explanations or comments by the Board on every qualification, reservation or adverse remark 

or disclaimer made in the auditor’s report; 

(g) particulars in respect of investments in terms of the provisions of section 27A of the Insurance 

Act as made applicable to the Corporation by notification issued under sub-section (2) of section 43; 

(h) particulars of contracts or arrangements with related parties, referred to in sub-section (1) of 

section 4C; 

(i) the state of the Corporation’s affairs; 

(j) the amounts, if any, which are carried to any reserves; 

(k) the amount, if any, which it recommends should be paid by way of dividend; 

(l) material changes and commitments, if any, affecting the financial position of the Corporation, 
which  have  occurred  between  the  end  of  the financial  year  to  which  the  financial  statements  relate 
and the date of the report; 

(m)  a  statement  indicating  the  manner  in  which  annual  evaluation  of  the  performance  of 

individual directors has been made under section 19B; 

(n) such other matters as may be prescribed: 

Provided that where disclosures referred to in this sub-section have been included in the financial 

statements, such disclosures may be referred to instead of being repeated in the Board’s report: 

Provided  further  that  where  the  policy  referred  to  in  clause  (e)  is  made  available  on  the 
Corporation’s website, it shall be sufficient compliance of the requirement under the said clause if the 
salient features of the policy and any changes therein are specified in brief in the Board’s report and 
the web-address at which the policy is available is indicated therein. 

(2)  The  Directors’  Responsibility  Statement  referred  to  in  clause  (b)  of  sub-section  (1)  shall  state 

that— 

(a)  in  the  preparation  of  the  annual  accounts,  the  requirements  referred  to  in  section  24B  were 

followed, along with proper explanation relating to material departures; 

(b)  accounting  policies  were  selected  and  applied  consistently  and  the  judgments  made  and 
estimates were reasonable and prudent, so as to give a true and fair view of the state of affairs of the 
Corporation  at  the  end  of  the  financial  year  and  of  the  profit  and  loss  of  the  Corporation  for  that 
period; 

28 

 
(c) proper and  sufficient  care for  the  maintenance  of  adequate  accounting  records  was taken  in 
accordance  with  the  provisions  of  this  Act  for  safeguarding  the  assets  of  the  Corporation  and  for 
preventing and detecting fraud and other irregularities; 

(d) the annual accounts were prepared on a going concern basis; 

(e)  the  vigilance  administration  referred  to  in  clause  (h)  of  sub-section  (1)  of  section  8  of  the 
Central Vigilance Commission Act, 2003 (45 of 2003) was in operation in the Corporation under the 
superintendence of the Central Vigilance Commission, and in addition, internal financial controls to 
be followed by the Corporation had been laid down and were operating effectively; and 

(f) proper systems were devised to ensure compliance with the provisions of applicable laws and 

were operating effectively. 

Explanation.—For  the  purposes  of  this  sub-section,  the  expression  “internal  financial  controls” 
means  the  policies  and  procedures  adopted  for  ensuring  the  orderly  and  efficient  conduct  of  the 
Corporation’s business, including adherence to its policies, safeguarding of its assets, prevention and 
detection  of  errors,  accuracy  and  completeness  of  accounting  records,  and  timely  preparation  of 
reliable financial information. 

(3) The Board’s report and any annexures thereto under sub-section (1) shall be signed on behalf 

of the Board by two whole-time directors and one director other than a whole-time director. 

24D. Penalties.—If the Chief Executive or the Managing Director in charge of finance or the head of 
the finance function of the Corporation or any other person of the Corporation charged by the Board with 
the duty of complying with the provisions of section 24A or section 24B or section 24C contravenes any 
of the said provisions, such Chief Executive or Managing Director or head of finance function or other 
person shall, for each section whose provisions have been contravened, be liable to pay penalty of a sum 
which shall not be less than fifty thousand rupees but which may extend to five lakh rupees.] 

1[25.  Appointment  of  auditors.—(1)  The  Corporation  shall,  at  its  first  annual  general  meeting, 
appoint as many auditors (which may be individual or firm) as it deems fit, and such auditor shall hold 
office  from  the  conclusion  of  that  meeting  till  the  conclusion  of  its  sixth  annual  general  meeting 
thereafter,  and  shall  similarly  appoint  auditor  for  subsequent  periods  of  five  years  at  a  time,  and  the 
manner and procedure of selection of auditors by the members at such a meeting shall be such as may be 
prescribed: 

Provided  that  before  such  appointment  is  made,  the  written  consent  of  the  auditor  to  such 
appointment, and a certificate from the auditor that the appointment, if made, shall be in accordance with 
such conditions as may be prescribed, shall be obtained from the auditor: 

Provided further that such certificate shall also declare that the auditor satisfies the criteria provided 

for eligibility for appointment as an auditor of a company under section 141 of the Companies Act. 

(2) The Corporation shall not appoint an auditor for more than one term of five consecutive years: 

Provided  that  an  auditor  who  has  completed  the  term  of  appointment  shall  not  be  eligible  for  re-

appointment or for fresh appointment as auditor for a period of five years from such completion: 

Provided further that no audit firm shall be appointed as auditor for a period of five years which, if 
appointed, as on the date of its appointment, would have a common partner or partners with the audit firm 
whose  term  as  auditor  in  the  Corporation  had  expired  in  the  financial  year  immediately  preceding  the 
financial year in which fresh appointment is to be made, or which is associated with the same network of 
audit firms as the audit firm whose term had expired as aforesaid: 

Provided also that nothing contained in this sub-section shall prejudice the right of the Corporation to 

remove an auditor or the right of the auditor to resign from such office of the Corporation. 

Explanation.—For  the  purposes  of  this  sub-section,  the  expression  “same  network”  includes  firms 
operating or functioning under a common brand name or trade name, or under common control, or which 

1. Subs. by Act 13 of 2021, s. 137, for section 25 (w.e.f. 30-6-2021). 

29 

 
                                                           
are  network  firms  as  defined  under  any  guidelines  for  networking  issued  by  the  Institute  of  Chartered 
Accountants of India, constituted under section 3 of the Chartered Accountants Act, 1949 (38 of 1949). 

(3) Subject to the provisions of this Act, the Corporation may resolve in a general meeting to provide 

that— 

(a)  in  the  audit  firm  appointed  by  it,  the  auditing  partner  and  his  team  shall  be  rotated  at  such 

intervals as may be resolved by members; 

(b) the audit shall be conducted by more than one auditor. 

(4) Any casual vacancy in the office of an auditor shall be filled by the Board within thirty days, but if 
such  casual  vacancy  is  as  a  result  of  the  resignation  of  an  auditor,  such  appointment  shall  also  be 
approved  by  the  Corporation  in  a  general  meeting  convened  within  three  months  of  the  Board  making 
recommendations in this behalf, and the auditor so appointed shall hold office till the conclusion of the 
next annual general meeting. 

(5) Where at any annual general meeting, no auditor is appointed, the existing auditor shall continue 

to be the auditor of the Corporation. 

(6) All appointments, including the filling of a casual vacancy of an auditor under this section, shall 

be made after taking into account the recommendations of the Audit Committee. 

(7) The remuneration of the auditor shall be fixed in the general meeting or in such manner as may be 

determined therein. 

(8)  Until  the  first  annual  general  meeting  is  held,  auditors  duly  qualified  to  act  as  auditors  of 
companies under the law for the time being in force relating to companies shall be appointed by the Board 
with  the  previous  approval  of  the  Central  Government,  and  shall  receive  such  remuneration  from  the 
Corporation as the Central Government may fix. 

(9)  Notwithstanding  anything  contained  in  sub-section  (1),  where  an  auditor  has  been  appointed 
previous to the first annual general meeting, either under section 25 [as it stood before the coming into 
force of section 137 of the Finance Act, 2021] or thereafter under sub-section (8), and the term specified 
for  such  auditor’s  appointment  has  not  expired,  and  the  auditor  meets  the  criteria  referred  to  in  sub-
section (1), such auditor shall continue till the expiry of the term so specified: 

Provided that nothing contained in this sub-section or in section 25A shall prejudice the right of the 
Corporation  to  remove  such  auditor  or  the  right  of  the  auditor  to  resign  from  such  office  of  the 
Corporation. 

(10) An auditor appointed under sub-section (1) or sub-section (8) or sub-section (9) shall provide to 
the Corporation or its subsidiaries such other services as are approved by the Board, but shall not include 
any  of  the  services,  whether  rendered  directly  or  indirectly,  that  are  enumerated  in  section  144  of  the 
Companies Act: 

Provided  that  an  auditor  who  has  been  performing  any  non-audit  services  on  or  before  the  coming 
into force of section 137 of the Finance Act, 2021 shall comply with the provisions of this sub-section 
before the close of the first financial year in which the said section comes into force. 

Explanation.—For  the  purposes  of  this  section,  the  word  “firm”  shall  include  a  limited  liability 

partnership incorporated under the Limited Liability Partnership Act, 2008 (6 of 2009). 

25A.  Removal  and  resignation  of  auditor.—(1)  The  auditor  appointed  under  section  25  may  be 

removed from office before expiry of the term of appointment only by a special resolution: 

Provided that before taking any action under this sub-section, an auditor proposed to be removed shall 
be given a reasonable opportunity of being heard, which shall include the right to represent in writing to 
the Corporation and, where the auditor requests that such representation be notified to members, to have a 
copy thereof sent to every member and in case a copy is not sent as aforesaid because it was received too 
late, to have the representation read out at the meeting, without prejudice to the right to be heard orally. 

30 

 
(2) The auditor who has resigned from the Corporation shall file within a period of thirty days from 
the date of resignation, a statement in the prescribed form with the Corporation, indicating the reasons and 
other facts as may be relevant with regard to the resignation. 

(3)  Without  prejudice  to  any  action  under  this  Act  or  any  other  law,  if  the  Central  Government  is 
satisfied, in consultation with the Comptroller and Auditor General of India, that any change of auditor is 
required, it may make an order that the auditor shall not function as such and may appoint another auditor 
in place of such auditor. 

25B. Powers and duties of auditors and auditor’s report.—(1) Every auditor of the Corporation 
shall have a right of access at all times to the books of account and vouchers of the Corporation, and shall 
be entitled to require from the officers of the Corporation such information and explanation as the auditor 
may  consider  necessary  for  the  performance  of  his  duties  as  auditor,  and  shall,  amongst  other  matters, 
inquire into the following matters, namely:— 

(a)  whether  loans  and  advances  made  by  the  Corporation  on  the  basis  of  security  have  been 

properly secured; 

(b) whether the terms on which loans and advances have been made are prejudicial to the interests 

of the Corporation or its members; 

(c)  whether  transactions  of  the  Corporation  which  are  represented  merely  by  book  entries  are 

prejudicial to its interests; 

(d) whether so much of the assets of the Corporation as consist of shares, debentures and other 

securities have been sold at a price less than that at which they were purchased; 

(e) whether loans and advances made by the Corporation have been shown as deposits; 

(f) whether personal expenses have been charged to revenue account; 

(g) where it is stated in the books and documents of the Corporation that any shares have been 
allotted for cash, whether cash has actually been received in respect of such allotment, and if no cash 
has actually been so received, whether the position  as stated in the account books and the balance-
sheet is correct, regular and not misleading: 

Provided that the auditor shall also have the right of access to the records of all the subsidiaries and 
associate  companies  of  the  Corporation,  in  so  far  as  they  relate  to  consolidation  of  the  Corporation’s 
financial statements with those of such subsidiaries and associate companies. 

(2) The auditor shall make a report to the members on the accounts examined by the auditor and on 
every  financial  statement  which  is  required  by  or  under  law  to  be  placed  in  general  meeting,  and  such 
report  shall,  after  taking  into  account  applicable  provisions  of  this  Act  and  any  other  law  for  the  time 
being in force, the standards referred to in section 24B, and matters that are required to be included in the 
audit report under the provisions of this Act or any other law for the time being in force, and to the best of 
the information and knowledge of the auditor, state that the said accounts and financial statements give a 
true and fair view of the state of the Corporation’s affairs as at the end of its financial year and profit or 
loss and cash flow for the year. 

(3) The auditor’s report shall also state— 

(a) whether the auditor has sought and obtained all the information and explanations which to the 
best  of  the  auditor’s  knowledge  and  belief  were  necessary  for  the  purpose  of  audit  and  if  not,  the 
details thereof and the effect of such information on the financial statements; 

(b) whether, in the auditor’s opinion, proper books of account as required by law have been kept 
by the Corporation so far as appears from the auditor’s examination of those books and proper returns 
adequate for the purposes of audit have been received from branches not visited by the auditor; 

(c)  whether  any  report  referred  to  in  the  proviso  to  sub-section  (6)  has  been  sent  to  the 
Corporation’s  auditor,  and  the  manner  in  which  the  Corporation’s  auditor  has  dealt  with  it  in 
preparing the auditor’s report; 

31 

 
(d) whether the Corporation’s balance-sheet and profit and loss account dealt within the report are 

in agreement with the books of account and returns; 

(e) whether, in the auditor’s opinion, the financial statements comply with applicable standards; 

(f) the observations or comments of the auditor on financial transactions and matters which have 

any adverse effect on the functioning of the Corporation; 

(g) whether any director is disqualified to be or remain a director under clause (i) of section 4A; 

(h) any qualification, reservation or adverse remark relating to the maintenance of accounts and 

matters connected therewith; 

(i)  whether  the  Corporation  has  adequate  internal  financial  controls  with  reference  to  financial 

statements in place and the operating effectiveness of such controls; 

(j) such other matters as may be prescribed. 

(4) Where any of the matters required to be included in the audit report under this section is answered 

in the negative or with a qualification, the report shall state the reasons therefor. 

(5) All qualifications, observations or comments mentioned in the report of the auditor appointed for 
the  Corporation,  in  respect  of  financial  transactions  or  matters  that  have  any  adverse  effect  on  the 
functioning of the Corporation, shall be read out in general meeting and shall be open to inspection by 
any member. 

(6) In respect of a branch or an office of the Corporation, the accounts shall be audited either by the 
auditor  appointed  for the Corporation (herein referred  to  as  Corporation’s  auditor)  in  this  section  or  by 
any other person qualified for appointment as an auditor of the Corporation and appointed as such under 
section 25, or where the branch or office is situated in a country outside India, the accounts of the branch 
or office shall be audited either by the Corporation’s auditor or by an accountant or by any other person 
duly qualified to act as an auditor of the accounts of the branch or office in accordance with the laws of 
that  country,  and  the  duties  and  powers  of  the  Corporation’s  auditor  with  reference  to  the  audit  of  the 
branch or office and the auditor thereof, if any, shall be such as may be prescribed: 

Provided that the auditor for a branch or office shall prepare a report on the accounts of the branch or 
office, examined by such auditor and shall send it to the Corporation’s auditor, who shall deal with it in 
the Corporation’s auditor’s report in such manner as the Corporation’s auditor may consider necessary. 

25C.  Internal  auditor.—(1)  The  Board  shall,  on  the  recommendation  of  the  Audit  Committee, 
appoint an internal auditor, who shall either be a chartered accountant or a cost accountant, or such other 
professional  as  may  be  determined  by  the  Board  to  conduct  the  internal  audit  of  the  functions  and 
activities of the Corporation. 

(2) The Audit Committee shall— 

(a) recommend to the Board for the appointment, remuneration and terms of appointment of the 

internal auditor; 

(b)  in  consultation  with  the  internal  auditor,  formulate  the  scope,  functioning,  periodicity  and 

methodology for conducting the internal audit; 

(c) review and monitor the internal auditor’s performance and effectiveness of audit process. 

25D. Special auditor.—Notwithstanding anything contained in sections 19C, 23A, 25, 25A and 25B, 
the  Central  Government  may,  at  any  time,  appoint  such  auditor  as  it  deems  fit  as  a  special  auditor  to 
examine  and  report  on  the  accounts  of  the  Corporation,  and  such  auditor  shall  have  the  same  rights  of 
access to the books of account and vouchers of the Corporation and entitlement to require information and 
explanation from the officers of the Corporation as an auditor of the Corporation has under section 25B.] 

32 

 
 
 
26. Actuarial valuations.—1[The  Board] shall, 2[every  year], cause an investigation to be made by 
actuaries  into  the  financial  conditions  of  the 3[life  insurance  business  of  the  Corporation,  including  a 
valuation of the liabilities of the Corporation in respect thereto], and submit the report of the actuaries to 
the 4[Board]. 

27. Annual report of activities of Corporation.—The Corporation shall, as soon as may be, after 
the  end  of  each  financial  year,  prepare  and  submit  to  the  Central  Government  in  such  form  as  may  be 
prescribed a report giving an account of its activities during the previous financial year, 5***. 

6[28.  Surplus  from  life  insurance  business,  how  to  be  utilized.—(1)  If  as  a  result  of  any 

investigation undertaken by the Board under section 26, any surplus emerges, — 

(a) for every financial year previous to the financial year for which the funds referred to in sub-
section  (2)  of  section  24  are  to  be  maintained,  and  for  any  subsequent  financial  year  for  which 
members may exempt the maintenance of such funds,— 

(I) ninety per cent., or such higher percentage as the Board may approve, of such surplus shall 

be allocated to or reserved for the life insurance policyholders of the Corporation; and 

(II) such percentage of the remaining surplus as the Board may approve, shall be allocated to 
or  reserved  for  members  and  may  either  be  credited  to  a  separate  account  maintained  by  the 
Corporation or be transferred to such reserve or reserves as the Board may specify; 

(b) for every financial year other than that referred to in clause (a),— 

(i) in respect of participating policyholders,— 

(I)  ninety  per  cent.,  or  such  higher  percentage  as  the  Board  may  approve,  of  surplus 
relating to such policyholders, shall be transferred to the participating policyholders fund, and 
shall  be  allocated  to  or  reserved  for  the  life  insurance  participating  policyholders  of  the 
Corporation; and 

(II)  such  percentage  of  the  remaining  surplus  as  the  Board  may  approve,  shall  be 
allocated  to  or  reserved  for  members  and  may  either  be  credited  to  a  separate  account 
maintained by the Corporation or be transferred to such reserve or reserves as the Board may 
specify; 

(ii)  in  respect  of  non-participating  policyholders,  one  hundred  per  cent.  of  surplus  relating  to 
such  policyholders shall  be  allocated  to  or  reserved for  members  and  may  either  be  credited  to  a 
separate account maintained by the Corporation or be transferred to such reserve or reserves as the 
Board may specify. 

(2) The remaining surplus referred to in sub-clause (ii) of clause (a) of sub-section (1) or in item (ii) 
of sub-clause (i) of clause (b) of sub-section (1), as the case may be, and the surplus referred to in sub-
clause (ii) of clause (b) of sub-section (1), and the profits allocated to or reserved for the members under 
section 28A, shall be utilised for such purposes as the Board may approve, including for the purpose of 
declaration or payment of dividend, the issue of fully paid-up bonus shares to members and crediting any 
of the reserves that the Board may create for any purpose. 

(3)  The  Corporation  shall,  with  the  approval  of  the  Board,  publish  on  its  website  its  surplus 
distribution policy at least once in five years, or such shorter period not less than three years as the Board 
may  deem  fit,  and  such  policy  shall  specify,  among  other  things,  the  percentages  referred  to  in                     
sub-section (1).] 

1. Subs. by Act 13 of 2021, s. 138, for “The Corporation” (w.e.f. 30-6-2021). 
2. Subs. by Act 8 of 2012, s. 4, for “once at least in every two years” (w.e.f. 31-3-2012). 
3. Subs. by Act 33 of 1965, s. 2, for certain words (w.e.f. 29-9-1965). 
4. Subs. by 13 of 2021, s. 138, for “Central Government” (w.e.f. 30-6-2021). 
5.  The  words  “and  the  report  shall  also  give  an  account  of  the  activities,  if  any,  which  are  likely  to  be  undertaken  by  the 

Corporation in the next financial year” omitted by s. 139, ibid. (w.e.f. 30-6-2021). 

6. Subs. by s. 140, ibid., for section 28 (w.e.f. 30-6-2021). 

33 

 
                                                           
 1[28A. Profits from any business (other than life insurance business) how to be utilised.—If for 
any financial year profits accrue from any business (other than life insurance business) carried on by the 
Corporation, then, after making provision for reserves and other matters for which provision is necessary 
or expedient, the balance of such profits shall be 2[allocated to or reserved for the members].] 

3[28B. Declaration of dividend.—(1) No dividend shall be declared or paid by the Corporation for 
any financial year except out of the surpluses and profits referred to in sub-section (2) of section 28 (after 
excluding  any  amount  representing  unrealised  gains,  notional  gains  or  revaluation  of  assets  and  any 
change in carrying amount of an asset or of a liability on measurement of the asset or the liability at fair 
value) for such year arrived at after providing for depreciation, or for any previous financial year or years 
arrived  at  after  providing  for  depreciation  and  remaining  undistributed,  or  out  of  both  the  aforesaid 
surpluses and profits: 

Provided that no dividend shall be declared or paid by the Corporation from its reserves other than 

free reserves: 

Provided  further  that  no  dividend  shall  be  declared  or  paid  by  the  Corporation  unless  any  losses 
carried  over  from  previous  years  and  any  depreciation  not  provided  for  in  previous  years  are  set  off 
against  the  surpluses  and  profits  referred  to  in  sub-section  (2)  of  section  28  for  the  financial  year  for 
which the dividend is proposed to be declared or paid. 

(2) The  Board  may,  during  any  financial  year or  at any  time  during  the period  from  the  close of a 
financial  year  till  the  holding  of  the  annual  general  meeting  for  that  financial  year,  declare  interim 
dividend out of the surpluses and profits referred to in sub-section (2) of section 28 of the financial year 
for which such interim dividend is sought to be declared, or out of the surpluses and profits referred to in 
sub-section (2) generated in the current financial year till the close of the quarter preceding the date of 
declaration of such interim dividend: 

Provided  that  in  case  the  Corporation  has  incurred  loss  during  the  current  financial  year  up  to  the 
close  of  the  quarter  immediately  preceding  the  date  of  declaration  of  interim  dividend,  such  interim 
dividend  shall  not  be  declared  at  a  rate  higher  than  the  average  of  the  dividends  declared  by  the 
Corporation during the immediately preceding three financial years. 

(3) The amount of the dividend, including interim dividend, shall be deposited in a scheduled bank in 

a separate account within five days from the date of declaration of such dividend. 

(4) No dividend shall be paid by the Corporation in respect of any share of the Corporation except to 
the member in whose name such share is entered on the register of members referred to in section 5C, or 
to his order, or to his banker, and shall be payable in cash and not in stock or other form of value: 

Provided  that  nothing  in  this  sub-section  shall  be  deemed  to  prohibit  the  capitalisation  of  the 
surpluses and profits referred to in sub-section (2) of section 28 for the purpose of issuing fully paid-up 
bonus shares or paying up any amount for the time being unpaid on any share held by members: 

Provided  further  that  any  dividend  payable  in  cash  may  be  paid  by  cheque  or  warrant  or  in  any 

electronic mode to the member entitled to such payment. 

28C. Unpaid Dividend Account.—(1) Where a dividend has been declared by the Corporation but 
has  not  been  paid  or  claimed  within thirty  days from  the  date  of  declaration to any  member  entitled  to 
payment  thereof,  the  Corporation  shall,  within  seven  days  from  the  expiry  of  the  said  period  of  thirty 
days, transfer the total amount of dividend which remains unpaid or unclaimed to a special account to be 
opened  by  the  Corporation  in  that  behalf  in  any  scheduled  bank,  to  be  called  the  Unpaid  Dividend 
Account. 

(2) The Corporation shall, within a period of ninety days of making any transfer of an amount under 
sub-section (1) to the Unpaid Dividend Account, prepare a statement containing the name and last known 
address  of,  and  the  amount  of  the  unpaid  dividend  payable  to,  each  member  entitled  to  such  unpaid 

1. Ins. by Act 33 of 1965, s. 4 (w.e.f. 29-9-1965). 
2. Subs. by Act 13 of 2021, s. 141, for “paid to the Central Government” (w.e.f. 30-6-2021). 
3. Ins. by s. 142, ibid. (w.e.f. 30-6-2021). 

34 

 
                                                           
dividend,  and  shall  place  such  statement  on  its  website  and  on  any  other  website  as  the  Central 
Government may specify. 

(3) If any default is made in transferring the total amount referred to in sub-section (1) or any part 
thereof to the Unpaid Dividend Account, the Corporation shall pay, from the date of such default, interest 
on  so  much  of  the  amount  as  has  not  been  transferred  to  the  said  account,  at  such  rate  as  is  specified 
in section 124 of the Companies Act, and the interest accruing on such amount shall ensure to the benefit 
of the members in proportion to the amount remaining unpaid to them. 

(4) Any person claiming to be entitled to any money transferred under sub-section (1) to the Unpaid 

Dividend Account may apply to the Corporation for payment of the money claimed. 

(5) The amount remaining unclaimed and unpaid for a period of seven years from the date it became 
due  for  payment  in  the  Unpaid  Dividend  Account  shall  be  transferred  to  the  Investor  Education  and 
Protection  Fund  established  under  sub-section  (1)  of section  125 of  the  Companies  Act  and  shall  be 
deemed to be an amount credited to the said Fund under sub-section (2) of the said section. 

(6) All shares in respect of which dividend has not been paid or claimed for seven consecutive years 
or more shall be transferred by the Corporation in the name of the Investor Education and Protection Fund 
along with a statement containing such details as may be prescribed: 

Provided that every claimant of such shares shall be entitled to claim the transfer thereof from the said 

Fund in accordance with such procedure and on submission of such documents as may be prescribed. 

Explanation.—For the  removal  of  doubts, it  is  hereby  clarified  that in case  any  dividend  is  paid  or 
claimed for any year during the said period of seven consecutive years, the share shall not be transferred 
to the Investor Education and Protection Fund.] 

29. Reports to be laid before Parliament.—The Central Government shall cause the report of the 
auditors under section 25, the report of the actuaries under section 26 and the report giving an account of 
the activities of the Corporation under section 27 to be laid before both Houses of Parliament as soon as 
may be after each such report is received by the Central Government. 

CHAPTER VII 
MISCELLANEOUS 

30. Corporation to have the exclusive privilege of carrying on life insurance business.—Except 
to  the  extent  otherwise  expressly  provided  in  this  Act,  on  and  from  the  appointed  day  the  Corporation 
shall have the exclusive privilege of carrying on life insurance business in India; and on and from the said 
day any certificate to registration under the Insurance Act held by any insurer immediately before the said 
day shall cease to have effect in so far as it authorises him to carry on life insurance business in India. 

1[30A.  Exclusive  privilege  of  Corporation  to  cease.—Notwithstanding  anything  contained  in  this 
Act, the exclusive privilege of carrying on life insurance business in India by the Corporation shall cease 
on and from the commencement of the Insurance Regulatory and Development Authority Act, 1999, and 
the  Corporation  shall,  thereafter,  carry  on  life  insurance  business  in  India  in  accordance  with  the 
provisions of the Insurance Act, 1938 (4 of 1938).] 

31. Exception in the case of insurance business in respect of persons residing outside India.—(1) 
Notwithstanding anything contained in section 30 or in the Insurance Act, the Central Government may, 
by  order,  permit  any  person  who  has  made  an  application  in  that  behalf,  to  carry  on  life  insurance 
business  in  India,  in  respect  of  the  lives  of  persons  ordinarily  resident  outside  India,  subject  to  such 
restrictions and conditions as may be specified in the order and any such order shall be deemed to have 
effect as if it were a certificate of registrations issued by the 2[Authority] to such person under section 3 of 
the Insurance Act in respect of that class of business. 

1. Ins. by Act 41 of 1999, s. 31 and the Second Schedule (w.e.f. 19-4-2000). 
2. Subs. by Act 41 of 1999, s. 31 and the Second Schedule, for “Controller” (w.e.f. 19-4-2000). 

35 

 
                                                           
(2) Nothing in sub-section (1) shall authorise any person permitted to carry on life insurance business 
of  the  nature  referred  to  in  that  sub-section,  to  insure  the  life  of  any  person  ordinarily  resident  outside 
India, during any period of his temporary residence in India. 

32. Power  of  Corporation  to  have  official seal  in certain  cases.—The  Corporation  may  have  for 
use in any zonal office, divisional office or in any office outside India an official seal which shall be a 
facsimile of the common seal of the Corporation, with the addition on its fact of the name of the zonal 
office, divisional office or other office where it is to be used, and any such official seal may be affixed to 
any deed or document to which the Corporation is a party. 

33.  Requirement  of foreign  laws  to  be  complied with  in  certain  cases.—Where  any  property  or 
rights appertaining to the controlled business of an insurer are transferred to and vested in the Corporation 
under  this  Act  or  would  be  so transferred  and  vested  but for  the fact that  such transfer and  vesting  are 
governed  otherwise  than  by  the  law  of  India,  the  insurer  shall  comply  with  such  directions  as  may  be 
given to him by the Corporation for the purpose of securing that the ownership of the property or, as the 
case may be, that the right is effectively transferred to the Corporation. 

34. Revesting of certain shares vested in the Administrator General.—Notwithstanding anything 
contained in the Insurance Act, all shares which have vested in the Administrator General of any State 
under sub-section (8) of the section 6A of that Act and which have not been disposed of in accordance 
with  the  provisions  of  that  sub-section  before  the  appointed  day,  shall,  on  payment  of  the  amount  of 
expenditure, if any, incurred by the Administrator General in relation to such shares by the persons who 
would  have  been  entitled  to  those  shares  if  the  said  sub-section  had  not  been  enacted,  revest  in  such 
persons. 

35. Repatriation of assets and liabilities in the case of foreign insurers in certain cases.—(1) Any 
insurer  incorporated  outside  India  may,  before  the  appointed  day,  make  an  application  to  the  Central 
Government stating that among the assets appertaining to the controlled business of the insurer there are 
assets brought into India by the insurer for the purpose of building up his life insurance business in India, 
which,  notwithstanding  anything  contained  in  section  7,  should  not  be  transferred  to  and  vested  in  the 
Corporation. 

(2)  On  receipt  of  an  application  under  sub-section  (1),  the  Central  Government  shall  determine  the 
value  of  the  assets  of  the  insurer  appertaining  to  his  controlled  business  in  existence  on  31st  day  of 
December, 1955, computed as at that date in accordance with the provisions contained in paragraph 3 of 
Part  B  of  the  First  Schedule,  and  deduct  therefrom  the  total  amount  of  the  liabilities  of  the  insurer 
appertaining to his controlled business in existence on the 31st day of December 1955, computed as at 
that date in accordance with the provisions contained in the Second Schedule; and if there is any excess, 
the Central Government may, by order, direct that such assets equivalent in value to the excess as may be 
specified in the order shall not be transferred to or vested in the Corporation, or where the order is made 
after the appointed day, that the Corporation shall be divested of the said assets. 

(3) In the case of any insurer incorporated outside India, the Central Government may also, by order, 
direct that any such liabilities in respect of life insurance policies expressed in any foreign currency issued 
on the lives of persons who are not citizens of India as are specified in the order together with any such 
assets necessary to meet the liabilities, as may be so specified, shall not be transferred to or vested in the 
Corporation or, if the order is made after the appointed day, that the Corporation shall be divested of such 
liabilities and assets as aforesaid. 

(4)  The  amount  of  liabilities  in  respect  of  the  policies  referred  to  in  an  order  made  under                 

sub-section (3) shall be computed as at the 31st day of December, 1955,— 

(a)  in  any  case  where  in  respect  of  the  insurer  concerned  an  order  has  been  made  under            

sub-section (2), in accordance with the provisions contained in clause (b) of the Second schedule; and 

(b) in any other case, in accordance with method A specified in the Second Schedule. 

Explanation.—In  computing  the  amount  of  liabilities  in  respect  of  the  policies  referred  to  in  this        

sub-section, allowance shall be made for receipts and payments in respect of such policies from the 31st 
day of December, 1955, up to the date of the order. 

36 

 
(5)  Every  order  made  by  the  Central  Government  under  this  section  shall  be  carried  out  by  the 

Corporation in such manner as the Central Government may direct. 

36.  Contracts  of  chief  agents  and  special  agents  to  terminate.—Notwithstanding  anything 
contained in the Insurance Act or in any other law for the time being in force every contract appertaining 
to controlled business subsisting immediately before the appointed day,— 

(a) between an insurer and his chief agent or between an insurer and a special agent; or 

(b) between the chief agent of an insurer and a special agent; 

shall,  as  from  the  appointed  day,  cease  to  have  effect  and  all  rights  accruing  to  the  chief  agent  or  the 
special agent under any such contract shall terminate on that day: 

Provided that in every such case compensation shall be given by the Corporation to the chief agent or 
the special agent, as the case may be, in accordance with the principles contained in the Third Schedule, 
and the provisions of sub-section (2) of section 16 shall, so far as may be, apply in every such case. 

37. Policies to be guaranteed by Central Government.—The sums assured by all policies issued by 
the Corporation including any bonuses declared in respect thereof and, subject to the provisions contained 
in section 14 the amounts assured by all policies issued by any insurer the liabilities under which have 
vested in the Corporation under this Act, and all bonuses declared in respect thereof, whether before or 
after the appointed day, shall be guaranteed as to payment in cash by the Central Government. 

1[Provided that the Corporation shall endeavour that its funds are invested in the attractive schemes 
formulated by  it  to  ensure increased bonus  to  policyholders  while having  least  investment  risk  so  as  to 
enable the Corporation to play a greater role in economic enrichment of the masses while maintaining its 
position as a leading player in the market.] 

38. Liquidation of Corporation.—No provision of law relating to the winding up of companies or 
corporations  shall  apply  to  the corporation  established  under  this  Act,  and  the Corporation shall  not be 
placed in liquidation save by order of the Central Government and in such manner as that Government 
may direct. 

39. Special provisions for winding up of certain insurers.—Where any insurer being a company 
(other  than  a  composite  insurer)  whose  controlled  business  has  been  transferred  to  and  vested  in  the 
Corporation under this Act has in accordance with the provisions of this Act collected and distributed any 
moneys paid to him by the Corporation by way of compensation or otherwise and has also complied with 
any  direction  given  to  him  by  the  Corporation  for  the  purpose  of  securing  that  the  ownership  of  any 
property  or  any  right  is  effectively  transferred  to  the  Corporation,  the  Central  Government  may  on 
application being made to it in this behalf by such insurer grant a certificate to the insurer that there is no 
reason for the continued existence of the insurer and where such a certificate has been granted shall cause 
the certificate to be published in the Official Gazette and upon the publication thereof the insurer shall be 
dissolved. 

40. Penalty for withholding property, etc.—If any person wilfully withholds or fails to deliver to 
the Corporation as required by section 13, any property or any books, documents or other papers which 
may be in his possession or unlawfully retains possession of any property of an insurer which has been 
transferred  to  and  vested  in  the  Corporation  under  this  Act  or  wilfully  applies  any  such  property  to 
purposes  other  than  those  expressed  in  or  authorised  by  this  Act,  he  shall,  on  the  complaint  of  the 
Corporation,  be  punishable  with  imprisonment  which  may  extent  to  one  year,  or  with  fine  which  may 
extend to one thousand rupees, or with both. 

41.  Tribunal  to  have  exclusive  jurisdiction  in  certain  matters.—No  civil  court  shall  have 
jurisdiction  to  entertain  or  adjudicate  upon  any  matter  which  a  Tribunal  is  empowered  to  decide  or 
determine under this Act. 

42.  Enforcement  of  decisions  of  Tribunals.—Any  decision  of  a Tribunal  may  be  enforced  in  any 
civil  court  within  the  local  limits  of  whose  jurisdiction  the  person  against  whom  the  decision  is  to  be 

1. The proviso ins. by Act 8 of 2012, s. 6 (w.e.f. 31-3-2012). 

37 

 
                                                           
enforced actually and voluntarily resides or carries on business or personally works for gain or owns any 
property, as if it were a decree passed by that court. 

43. Application of the Insurance Act.—(1) The following sections of the Insurance Act shall, so far 

as may be, apply to the Corporation as they apply to any other insurer, namely:— 

Sections 2, 2B, 3, 18, 26, 33, 38, 39, 41, 45, 46, 47A, 50, 51, 52, 110A, 110B, 110C, 119, 121, 

122 and 123. 

(2)  The  Central  Government  shall  as  soon  as  may  be  after  the  commencement  of  this  Act,  by 
notification in the Official Gazette, direct that the following sections of the Insurance Act shall apply to 
the  Corporation  subject  to  such  conditions  and  modifications  as  may  be  specified  in  the  notification, 
namely:— 

Sections 2D, 10, 11, 13, 14, 15, 20, 21, 22, 23, 25, 27A, 28A, 35, 36, 37, 40, 40A, 40B, 43, 44, 

102 to 106, 107 to 110, 111, 113, 114 and 116A. 

1[(2A) Section 42 of the Insurance Act shall have effect in relation to the issue to any individual of a 
licence  to  act  as  an  agent  for  the  purpose  of  soliciting  or  procuring  life  insurance  business  for  the 
Corporation as if the reference to an officer authorised by the 2[Authority] in this behalf in sub-section (1) 
thereof included a reference to an officer of the Corporation authorised by the 2[Authority] in this behalf.] 

(3) The Central Government may, be notification in the Official Gazette, direct that all or any of the 
provision of the Insurance Act other than those specified in sub-section (1) or sub-section (2), shall apply 
to the Corporation subject to such conditions and modifications as may be specified in the notification. 

(4)  Every  notification  issued  under sub-section (2)  or  sub-section  (3)  shall  be laid for  not less  than 
thirty days before both Houses of Parliament as soon as possible after it is issued, and shall be subject to 
such  modifications  as  Parliament  may  make  during  the  session  in  which  it  is  so  laid  or  the  session 
immediately following. 

(5)  Save  as  provided  in  this  section,  nothing  contained  in  the  Insurance  Act  shall  apply  to  the 

Corporation. 

43A.  [Deduction  of  income-tax  not  to  be  made  on  interest  or  dividend.]  Omitted  by  the  Finance        

Act, 2002 (20 of 2002), s. 157 (w.e.f. 1-6-2002). 

44. Act not to apply in certain cases.—Nothing contained in this Act shall apply in relation to— 

(a)  any  insurer  whose  business  is  being  voluntarily  wound  up  or  is  being  wound  up  under  the 

orders of the Court; 

(b) any insurer to whom the Insurance Act does not apply by reason of the provisions contained 

in section 2E thereof; 

3[Provided that  nothing  contained  in this  clause  shall apply  on  and  from  the  date  on  which the 

provisions contained in section 2E of the Insurance Act, 1938 (4 of 1938) shall cease to operate.] 

(c)  any  composite  insurer  in  respect  of  the  management  of  whose  affairs  an  Administrator  has 

been appointed under section 52A of the Insurance Act; 

(d) the scheme run by the Central Government known as the Post Office Life Insurance Fund; 

(e)  any  approved  superannuation  fund  as  defined  in  clause  (a)  of  section  58N  of  the  Indian       

Income-tax Act, 1922 (11 of 1922), which is in existence on the appointed day; 

(f) any scheme in existence on the appointed day or any scheme framed after the appointed day 
with  the  approval  of  the  Central  Government  whereby,  in  consideration  of  certain  compulsory 
deductions  made  by  Government  from  the  salaries  of  its  employees  as  part  of  the  conditions  of 

1. Ins. by Act 17 of 1957, s. 3 (w.e.f. 6-6-1957). 
2. Subs. by Act 41 of 1999, s. 1, for “Controller” (w.e.f. 19-4-2000). 
3. The proviso ins. by Act 8 of 2012, s. 7 (w.e.f. 31-3-2012). 

38 

 
                                                           
service, the payment of money is assured by Government on the death of the employee concerned or 
on the happening of any contingency dependent on his life. 

1[(g) any Family Pension Scheme Framed under the Coal Mines Provident Fund, Family Pension 
and Bonus Schemes Act, 1948 (46 of 1948), or the Employees Provident Funds and Family Pension 
Fund Act, 1952 (19 of 1952), for the purpose of providing family pension and life assurance benefits 
to the employees covered by the said Scheme.] 

2[45.  Special  provisions  regarding  transfer  of  controlled  business  of  certain  composite 
insurer.—Notwithstanding anything contained in clause (c) of section 44, the Central Government may, 
by notification in the Official Gazette, direct that on and with effect from such date as may be specified in 
the notification the assets and liabilities appertaining to the controlled business of a composite insurer in 
respect of the management of whose affairs an Administrator has been appointed under section 52A of the 
Insurance Act shall be transferred to the vested in the Corporation, and on the issue of such a notification 
the provisions of this Act shall, so far as may be, apply in relation to such insurer and to the transfer and 
vesting of the assets and liabilities of his controlled business in the Corporation as they apply in relation 
to all other insurers and to the transfer and vesting of assets and liabilities of their controlled business in 
the  Corporation,  subject  to  the  modification  that  references  in  this  Act  to  the  appointed  day  shall  be 
construed as references to the day specified in the notification.] 

3[46. Defects in constitution of Corporation or Committees or in appointment or nomination of 
directors not to invalidate acts or proceedings.—(1) No act or proceeding of the Corporation or of its 
Board or any Committee thereof shall be called in question on the ground merely of the existence of any 
vacancy or defect in the constitution of the Corporation or the Board or such Committee, as the case may 
be. 

(2) No act done by an individual as a director shall be deemed to be invalid, notwithstanding that it 
was subsequently noticed that his appointment or nomination, as the case may be, was invalid by reason 
of any defect or disqualification or had terminated by virtue of any provision contained in this Act: 

Provided  that  nothing  in  this  sub-section  shall  be  deemed  to  give  validity  to  any  act  done  by  such 
individual as director after his appointment or nomination, as the case may be, has been noticed by the 
Corporation to be invalid or to have terminated. 

47. Protection of action taken under this Act.—(1) No suit, prosecution or other legal proceeding 
shall lie against any director or employee of the Corporation for anything which is in good faith done or 
intended to be done in pursuance of this Act or of any rules or regulations made thereunder. 

(2)  A  director  who  is  not  a  whole-time  director  shall  be  held  liable  only  in  respect  of  such  acts  of 
omission or commission of the Corporation which had occurred with his knowledge, attributable through 
Board processes, and with his consent or connivance or where he had not acted diligently. 

Explanation.—For  the  purposes  of  this  sub-section,  the  reference  to  “Board”  shall  include 

Committees of the Board.] 

48. Power to make rules.—(1) The Central Government may, by notification in the Official Gazette 

make rules to carry out the purposes of this Act. 

(2)  In  particular,  and  without  prejudice  to  the  generality  of  the  foregoing  power,  such  rules  may 

provide for all or any of the following matters, namely:— 

(a) the term of office and the conditions of service of 4[directors]; 
5[(aa) the manner of disclosure of interest by a director under section 4B; 

1. Ins. by Act 16 of 1971, s. 31 and the Third Schedule (w.e.f. 23-4-1971). 
2. Ins. by Act 17 of 1957, s. 4 (w.e.f. 6-6-1957). 
3. Subs. by Act 13 of 2021, s. 143, sections 46 and 47 (w.e.f. 30-6-2021). 
4. Subs. by s. 144, ibid., for “members” (w.e.f. 30-6-2021). 
5. Subs. by s.144, ibid., for clause (aa) (w.e.f. 30-6-2021). 

39 

 
                                                           
(ab)  the  conditions  subject  to  which  the  Board  may  consent  to  related  party  transactions  under 

section 4C; 

(ac) the securities and instruments which may be issued under section 5; 
(ad)  the  manner  of  reservation  in  favour  of  life  insurance  policyholders  and  allotment  against 

such reservation, in relation to a public issue, under clause (a) of sub-section (9) of section 5;] 

(b) the manner in which the moneys and other assets belonging to any such fund as is referred to 

in section 8 shall be apportioned between the trustees of the fund and the Corporation; 

(c)  the  services  which  the  chief  agent  should  have  rendered  for  the  purpose  of  the  proviso  to 

section 12; 

1[(cc)  the  terms  and  conditions  of  service  of  the  employees 2***  of  the  Corporation,  including 

those who became employees 2*** of the Corporation on the appointed day under this Act;] 

(d) the jurisdiction of the Tribunals constituted under section 17; 

(e) the manner in which, and the persons to whom, any compensation under this Act may be paid; 

(f) the time within which any matter which may be referred to a Tribunal for decision under this 

Act may be so referred; 

(g)  the  manner  in  which  and  the  conditions  subject  to  which  investments  may  be  made  by  the 

Corporation; 

(h) the manner in which an Employees and Agents Relations Committee may be constituted for 

each zonal office; 

3[(ha) the manner in which general meetings shall be held, and the business to be transacted and 

procedure to be followed thereat; 

(hb) the quorum for a general meeting, and the manner of holding the meeting if it could not be 

held for want of quorum and was adjourned under section 23A; 

(hc) the manner in which persons may attend a general meeting and exercise their vote; 

(hd) the manner in which notices may be served on behalf of the Corporation upon members or 

other persons; 

(he)  the  form  and  manner  in  which  the  financial  statements  referred  to  in  sub-section  (8)  of 

section 24B may be issued, circulated or published; 

(hf) matters that may be prescribed under clause (n) of sub-section (1) of section 24C; 
(hg) the manner and procedure of selection and conditions of appointment of auditors under sub-

section (1) of section 25; 

(hh)  the  form  in  which  an  auditor  who  has  resigned  shall  indicate  the  reasons  and  other  facts 

relevant to the resignation under sub-section (2) of section 25A; 

(hi) the matters to be prescribed under clause (j) of sub-section (3) of section 25B; 
(hj) the duties and powers of the Corporation’s auditor with reference to the audit of a branch or 

office of the Corporation and the auditor thereof, under sub-section (6) of section 25B; 
(hk) the details, procedure and documents under sub-section (6) of section 28C.] 
(i)  the  form  in  which  the  report  giving  an  account  of  the  activities  of  the  Corporation  shall  be 

prepared; 

(j) the conditions subject to which the Corporation may appoint employees; 

(k) the fees payable under this Act and the manner in which they are to be collected; 

1. Ins. by Act 1 of 1981, s. 2 (w.e.f. 20-6-1979). 
2. The words “and agents” omitted by Act 8 of 2012, s. 8 (w.e.f. 31-3-2012). 
3. Ins. by Act 13 of 2021, s. 144 (w.e.f. 30-6-2021). 

40 

 
                                                           
(l) any other matter which has to be or may be prescribed; 

1[(2A) The regulations and other provisions as in force immediately before the commencement of the 
Life Insurance Corporation (Amendment) Act, 1981, with respect to the terms and conditions of service 
of  employees  and  agents  of  the  Corporation  including  those  who  became  employees  and  agents  of  the 
Corporation on the appointed day under this Act, shall be deemed to be rules made under clause (cc) of 
sub-section (2) and shall, subject to the other provisions of this section, have effect accordingly. 

(2B) The power to make rules conferred by clause (cc) of sub-section (2) shall include— 

(i) the power to give retrospective effect to such rules; and 

(ii)  the  power  to  amend  by  way  of  addition,  variation  or  repeal,  the  regulations  and  other 

provision refereed to in sub-section (2A), with retrospective effect, 

from a date not earlier than the twentieth day of June, 1979. 

(2C) The provisions of clause (cc) of sub-section (2) and sub-section (2B) and any rules made under 
the said clause (cc) shall have effect, and any such rule made with retrospective effect from any date shall 
also be deemed to have had effect from that date, notwithstanding any judgement, decree or order of any 
court,  tribunal  or  other  authority  and  notwithstanding  anything  contained  in  the  Industrial  Disputes             
Act, 1947 (14 of 1947), or any other law or any agreement, settlement, award or other instrument for the 
time being in force.] 

2[(3) Every rule made by the Central Government under this Act shall be laid, as soon as may be after 
it is made, before each House of Parliament while it is in session, for a total period of thirty days which 
may be comprised in one session or in two or more successive sessions, and if, before the expiry of the 
session  immediately  following  the  session  or  the  successive  sessions  aforesaid,  both  Houses  agree  in 
making any modification in the rule or both Houses agree that the rule should not be made, the rule shall 
thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that 
any such modification or annulment shall be without prejudice to the validity of anything preciously done 
under that rule.] 

49. Power to make regulations.—(1) The  3[Board] may, with the previous approval of the Central 
Government, by notification in the Gazette of India, make regulations not inconsistent with this Act and 
the rules made thereunder to provide for all matters for which provision is expedient for the purpose of 
giving effect to the provisions of this Act. 

(2) In particular, and without prejudice to the generality of the foregoing power, such regulations may 

provide for— 

(a) the powers and functions of the 3[Board] which may be delegated to the Zonal Managers; 

4[(b)  the  method  of  recruitment  of  employees  and  agents  of  the  Corporation  and  the  terms  and 

conditions of the agents;] 

5*                               *                                *                                    *                                 * 

6* 

* 

* 

* 

* 

(d) the territorial limits of each zone established under this Act and the business to be transacted 

in each Zone; 

(e) the manner in which the 7[fund or funds] of the Corporation shall be maintained; 

(f) the maintenance of separate funds and accounts at each of the zonal offices; 

1. Ins. by Act 1 of 1981, s. 2 (w.e.f. 31-1-1981). 
2. Subs. by Act 52 of 1975, s. 43, for sub-section (3) (w.e.f. 16-2-1976). 
3. Subs. by Act 13 of 2021, s. 145, for “Corporation” (w.e.f. 30-6-2021). 
4. Subs. by Act 8 of 2012, s. 9, for clause (b) (w.e.f. 31-3-2012). 
5. Clause (bb) omitted by Act 1 of 1981, s. 3 (w.e.f. 31-1-1981). 
6. Clause (c) omitted by Act 13 of 2021, s. 145 (w.e.f. 30-6-2021). 
7. Subs. by s. 145, ibid., for “Fund” (w.e.f. 30-6-2021). 

41 

 
 
 
 
 
 
 
 
                                                           
(g) the jurisdiction of each divisional office and the establishment of Councils representative of 
policy-holders  in  each  area  served  by  a  divisional  office  for  the  purpose  of  advising  the  divisional 
office in respect of any matter which may be referred to it; 

1[(h) the manner in which meetings of the Board and its Committees shall be held, the business to 

be transacted and procedure to be followed thereat, and the quorum therefor;] 

2*                             *                                  *                                    *                                * 

3*                             *                                  *                                    *                                * 

(k)  the  classification  of  policies,  whether  issued  by  the  Corporation  or  by  any  insurer  whose 
controlled  business  has  been  transferred  to  and  vested  in  the  Corporation,  for  the  purposes  of 
declaring differential bonuses, wherever necessary; 

(l) the manner in which and the intervals within which the accounts of the various zonal offices, 

divisional offices and branch offices may be inspected and their accounts audited, 

(m) the conditions subject to which any payment may be made by the Corporation. 
4[(n) the manner of election of directors under clause (f) of sub-section (2) of section 4; 

(o) the form and manner of registers to be kept and maintained under sub-section (1) of section 

5B; 

(p) the manner of nomination by an individual registered member or joint holder of shares, the 
manner of variation or cancellation of such nomination, and the manner of nomination in favour of a 
minor, under section 5E; 

(q)  the  manner  in  which  and  the  conditions  subject  to  which  shares,  including  partly  paid-up 

shares, may be issued, held, transferred and registered; 

(r) the maintenance and operation of the funds and reserves under section 24; 
(s) the form and manner in which the books and records referred to in section 24A may be kept;] 

4[(2A)  Any  reference  in  the  regulations  as  in  force  immediately  before  the  coming  into  force 
of section 132 of the Finance Act, 2021 to “Investment Committee” shall be construed as a reference to 
the Investment Committee of the Board referred to in section 19A.] 

5[(3) Every regulation made under this section shall be laid, as soon as may be after it is made, before 
each House of Parliament, while it is in session, for a total period of thirty days which may be comprised 
in one session or in two or more successive sessions, and if, before the expiry of the session immediately 
following the session or the successive sessions aforesaid, both Houses agree in making any modification 
in  the  regulation  or  both  Houses  agree  that  the  regulation  should  not  be  made,  the  regulation  shall 
thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that 
any such modification or annulment shall be without prejudice to the validity of anything previously done 
under that regulation]. 

6[50. Form, manner, etc., for companies to apply with modifications.—Where this Act provides 
that the form or manner or period or details in respect of any declaration to be made or the particulars to 
be included in any register to be maintained shall be such as may be prescribed for a company under the 
Companies Act, such prescribed form or manner or period or details or particulars, as the case may be, 
shall apply subject to such modifications, exceptions and conditions that the Central Government may, by 
notification, specify. 

1. Subs. by Act 13 of 2021,  s. 145, for clause (h) (w.e.f. 30-6-2021). 
2. Clause (i) omitted by s. 145, ibid. (w.e.f. 30-6-2021). 
3. Omitted by Act 8 of 2012, s. 9 (w.e.f. 31-3-2012). 
4. Ins. by Act 13 of 2021, s. 145 (w.e.f. 30-6-2021). 
5. Ins. by Act 1 of 1981, s. 3 (w.e.f. 31-1-1981). 
6. Ins. by Act 13 of 2021, s. 146 (w.e.f. 30-6-2021). 

42 

 
                                                           
51. Power to remove  difficulties.—(1)  If  any  difficulty  arises  in  giving  effect to  the  provisions  of 
this Act as amended by Part III of Chapter VI of the Finance Act, 2021, the Central Government may, by 
order published in the Official Gazette, make such provisions, not inconsistent with the provisions of this 
Act, as appear to it to be necessary or expedient for removing the difficulty: 

Provided that no such order shall be made after the expiry of a period of three years from the date of 

commencement of Part III of Chapter VI of the Finance Act, 2021. 

(2) Every order made under this section shall, as soon as may be after it is made, be laid on the table 

of each House of Parliament.] 

43 

 
 
  
 
THE FIRST SCHEDULE 

(See section 16) 

PRINCIPLES FOR DETERMINING COMPENSATION 

PART A 

The  compensation  to  be  given  by  the  Corporation  to  an  insurer  having  a  share  capital  on  which 
dividend or bonus is payable, who has allocated as bonus to policy-holders the whole or any part of the 
surplus  as  disclosed  in  the  abstracts  prepared  in  accordance  with  Part  II  of  the  Fourth  Schedule  to  the 
Insurance Act in respect of the last actuarial investigation relating to his controlled business as at a  date  
earlier than the 1st day of January, 1955, shall be computed in accordance with the provisions contained 
in paragraph 1 or paragraph 2, whichever is more advantageous to the insurer. 

Paragraph  1.—Twenty  times  the  annual  average  of  the  share  of  the  surplus  allocated  to               

share-holders  as  disclosed  in  the  abstracts  aforesaid  in  respect  of  the  relevant  actuarial  investigations 
multiplied  by  a  figure  which  represents  the  proportion  that  the  average  business  in  force  during  the 
calendar years 1950 to 1955 bears to the average business in force during the calendar years comprised in 
the period between the date as at which the actuarial investigation immediately preceding the earliest of 
the relevant actuarial investigations was made and the date as at which the last of such investigations was 
made. 

Paragraph  2.—Half  the  amount  payable  under  paragraph  1  plus  the  paid-up  capital  or  assets 
equivalent  thereto,  or,  in  the  case  of  a  composite  insurer,  that  part  of  the  paid-up  capital  or  assets 
equivalent thereto which has or been transferred to and vested in the Corporation under this Act less the 
amount, if any of expenses or losses or both capitalised by the insurer for the purposes of Form A in the 
First Schedule to the Insurance Act. 

Explanation 1.—For the purposes of paragraph 1,— 

(a)  “relevant  actuarial  investigations”  means  such  minimum  number  of  latest  actuarial 
investigations  as  at  dates  earlier  than  the  1st  day  of  January,  1955  (not  being  less  than  two  in  any 
case), as would leave the period intervening between the date as at which the actuarial investigation 
immediately preceding the first of such investigations was made and the date as at which the last of 
such investigations was made, to be not less than four years; 

(b) “average business in force” means the average of total sums assured by the insurer (including 
any  bonus)  in  respect  of  his  controlled  business  as  on  the  31st  day  of  December  of  each  of  the 
relevant calendar years. 

Explanation  2.—For  the  purposes  of  paragraph  1,  where  an  insurer  has  allocated  to  share-holders 
more than 5 per cent, of any such surplus as is referred to therein, the insurer shall be deemed to have 
allocated  only  5  per  cent,  of  the  surplus  and  where  an  insurer  has  not  allocated  any  such  surplus  to      
share-holders  or  has allocated  to  share-holders  less  than  31/2  per  cent, of  any  such  surplus,  the  insurer 
shall be deemed to have allocated 31/2 per cent, of the surplus. 

Explanation 3.—In the case of any insurer incorporated outside India, the annual average of the share 
of the surplus allocated to share-holders for the purposes of paragraph 1 shall be deemed to be the annual 
average  of  the  surplus  as  disclosed  in  the  abstracts  prepared  in  accordance  with  Part  II  of  the  Fourth 
Schedule  to  the  Insurance  Act  in  respect  of  the  relevant  actuarial  investigations  multiplied  by  a  figure 
which is the average of the two figures mentioned below:— 

(i)  a  figure  representing  the  proportion  which  the  share  allocated  to  share-holders  out  of  the 
surplus  in  respect  of  the  world  business  of  the  insurer  (such  share  being  computed  subject  to  the 
provisions of Explanation 2) bears to the whole of such surplus as ascertained with reference to the 
last  actuarial  investigation  relating  to  such  business  as  at  a  date  earlier  than  the  1st  day  of          
January, 1955; and 

44 

 
 
 
(ii)  a  figure  representing  the  proportion  which  the  share  allocated  to  share-holders  out  of  the 
surplus  in  respect  of  the  world  business  of  the  insurer  (such  share  being  computed  subject  to  the 
provisions of Explanation 2) bears to the whole of such surplus as ascertained with reference to the 
actuarial  investigation  relating  to  such  business  immediately  preceding  the  actuarial  investigation 
referred to in clause (i): 

Provided  that  in  the  case  of  any  such  insurer  in  respect  of  whom  an  order  has  been  made  under 

section 35 the amount computed as follows shall be deemed to be the annual average of the surplus:— 

(a) there shall be deducted from the annual average of the surplus, interest at 31/2 per cent. per 
annum  for  one  year  calculated  on  the  assets  specified  in  any  order  made  under  sub-section  (2)  of 
section 35; 

(b) with respect to the balance arrived at under clause (a), there shall be computed an amount that 
bears the same proportion to the said balance as the liability on policies appertaining to the controlled 
business  of  the  insurer,  other  than  those  expressed  in  any  foreign  currency  issued  on  the  lives  of 
persons who are citizens of India, bears to the liability in respect of all policies appertaining to such 
business,  the  liabilities  on  policies  being  computed  as  at  the  31st  day  of  December,  1955,  in 
accordance with the provisions contained in clause (b) of the Second Schedule: 

Provided further that— 

(a) in any case where the order made under section 35 is with reference to sub-section (2) only, 

the preceding proviso shall have effect as if clause (b) had been omitted therefrom; and 

(b) in any case where the order made under section 35 is with reference to sub-section (3) only, 

the preceding proviso shall have effect as if— 

(i) clause (a) has been omitted; 

(ii) in clause (b), the words, brackets and letter “with respect to the balance arrived at under 
clause (a)” had been omitted; for the words “the said balance” the words “annual average of the 
surplus”  had  been  substituted;  and  for  the  words,  brackets  and  letter  “with  the  provisions 
contained  in  clause  (b)  of”,  the  words  and  letter  “with  method  a  specified  in”  had  been 
substituted. 

Explanation  4.—Where  an  insurer  incorporated  outside  India  whose  paid-up  capital  is  outside 

India— 

(a) the provisions contained in paragraph 1 shall have effect as if the words “less a sum equal to 
that part of the paid-up capital of the insurer as may be determined by the Central Government to be 
allocable to the controlled business of the insurer” were inserted at the end of that paragraph; and 

(b) the provisions contained in paragraph 2 shall have effect as if,— 

(i) the words “without making the deduction referred to in clause (a) of Explanation 4” had 

been inserted after the words “half the amount payable under paragraph 1”; and 

(ii)  the  words  beginning  with  “plus  the  paid-up  capital”  and  ending  with  “in  the  First 

Schedule to the Insurance Act” had been omitted. 

PART B 

The  compensation  to  be  given  by  the  Corporation  to  an  insurer  having  a  share  capital  on  which 
dividend or bonus is payable who has not made any such allocation as is referred to in Part A in respect of 
the last actuarial investigation as at a date earlier than the 1st day of January, 1955, shall be an amount 
equal to the value of the assets of the insurer appertaining to his controlled business in existence, on the 
19th day of January, 1956, computed as at that date in accordance with the provisions of paragraph 3 less 
the  amount  of  liabilities  of  the  insurer  appertaining  to  such  business  in  existence  on  the  19th  day  of 
January, 1956, computed as at that date in accordance with the provisions of paragraph 4. 

45 

 
 
 
Paragraph 3.—Assets.—(a) The market value of any land or buildings. 

(b) The market value of any shares, securities or other investments held by the insurer.  

(c) The total amount of the premiums paid by the insurer in respect of all leasehold properties reduced 
in the case of each such premium by an amount which bears to such premium the same proportion as the 
expired term of the lease in respect of which such premium shall have been paid bears to the total term of 
the lease. 

(d) The amount of debts due to the insurer, whether secured or unsecured, to the extent to which they 

are reasonably considered to be recoverable. 

(e) The  amount  of  premiums  which  have  fallen  due to  the  insurer  on  policies of  life  Insurance  but 

have not been paid and the days of grace for payment of which have not expired. 

(f) The amount of cash held by the insurer whether in deposit with a bank or otherwise. 

(g) The value of all tangible assets other than those falling within any of the preceding clauses. 

Paragraph 4.—Liabilities.—(a) The total amount of liabilities of the insurer to holders of policies in 

respect of his controlled business on account of matured claims on which payment has to be made. 

(b)  The  total  amount  of  liabilities  of  the  insurer  to  holders  of  policies  in  respect  of  his  controlled 
business  which  have  not  matured  for  payment,  the  liabilities  in  respect  thereof  being  calculated  on  the 
following actuarial bases:— 

(i) in respect of whole-life assurances and endowment assurances, the mortality table to be used 
shall be the Oriental (25-35) ultimate mortality table, and an interest rate of 31/4 per cent. per annum 
shall be assumed and for expenses 20 per cent. of office premiums in the case of with-profit policies 
and 15 per cent. of office premiums in the case of non-profit policies shall be reserved; 

(ii)  in  respect  of  other  policies  such  actuarial  bases  determined  by  the  actuary  making  the 

valuation as may be consistent with the basis specified in clause (i); and  

(iii) in determining the liabilities of insurers under clause (b) the actuary shall make all the usual 

provisions and reserves as are ordinarily done in such cases. 

(c) The total amount of all other liabilities of the insurer. 

(d)  Where,  as  a result  of  the  actuarial  valuation  of  policy  liabilities  made  under  clause, (b) the life 
insurance fund is shown to be in surplus, a sum equal to 96 per cent of such surplus shall be deemed to be 
a liability under this paragraph. 

Explanation.—For  the  purposes  of  this  Part,  in the  case  of an  insurer incorporated  outside  India  in 
respect whom an order under section 35 has been made, the assets or the assets and liabilities as the case 
may be, specified in the order shall be excluded. 

Paragraph  5.—If  the  insurer  to  whom  compensation  is  to  be  given  under  this  part  is  a  displaced 

insurer, the compensation to be given shall be computed in accordance with following provisions:— 

Firstly,  there  shall  be  ascertained  the  losses  incurred  by  the  displaced  insurer  in  respect  of  claims 
arising by deaths established by the displaced insurer to have been caused by the civil disturbances which 
took place on the occasion of the setting up of the Dominions of India and Pakistan, the total loss being 
taken as the difference between the amounts paid as claims in respect of such deaths and the total amount 
of the actuarial reserve in respect of the relevant policies; 

Secondly,  there  shall  be  ascertained  the  difference  between  the  market  value  as  at  the  15th  day  of 
August  1947,  of  any  immovable  property  in  West  Pakistan  belonging  to  the  displaced  insurer  and  the 
market value thereof determined under Paragraph 3 of this part, or, where any such immovable property 
has been sold before the 19th day of January, 1956, the difference between the market value thereof as at 
the 15th day of August 1947, and the sale price; 

46 

 
Thirdly, there shall be ascertained the amount of deposits held by the displaced insurer in banks which 
could not be withdrawn on account of a moratorium declared under any law for the time being in force, to 
the extent to which such deposits have become losses; 

Fourthly,  there  shall  be  ascertained  the  difference  between  the  market  value  as  at  the  15th  day  of 
August,  1947,  of  any  shares  in  any  company  now  carrying  on  business  in  West  Pakistan  held  by  the 
displaced insurer and which had been acquired before the 15th day of August, 1947, and the market value 
of such shares as at the 19th day of January, 1956. 

The amount of compensation to be given to the displaced insurer under this part shall be— 

(a) the amount which would have to be given to him if this Paragraph had not been enacted, plus 

(b)  an  amount  which  represents  one-half  of  the  difference  between  the  compensation  which 
would have to be given to him if to the value of the assets referred to in Paragraph 3 there had been 
added the sum of the four items referred to in this Paragraph and with respect to the liabilities referred 
to  in  Paragraph  4,  the life insurance  fund  had  been  increased  by  a  like  sum,  and  the  compensation 
which would have to be given to him if this Paragraph had not been enacted. 

Or 

one half of the paid-up capital of the displaced insurer whichever is less. 

Explanation.—For the purposes of this Paragraph  “displaced insurer” means an insurance company 
whose  registered  office  during  any  part  of  the  year  1947  was  in  any  area  now  forming  part  of  West 
Pakistan and whose registered office is now in India. 

PART C 

The compensation to be given by the Corporation to an insurer— 

(a) having no share capital; or 

(b) having a share capital on which a dividend or bonus is not payable; 

shall  be in the form  of  an addition  at the rate  of  rupee  one  per  thousand  in  respect  of  the  sum  assured 
(excluding bonuses) under each with-profit policy, and in the case of an insurer falling under clause (b), 
such compensation shall also include a sum equivalent to the paid-up capital of the insurer to be paid to 
him. 

47 

 
 
  
 
 
THE SECOND SCHEDULE 

(See section 35) 

PRINCIPLES FOR DETERMINING THE VALUE OF LIABILITIES IN CERTAIN CASES 

The  total  amount  of  the  liabilities  of  an  insurer  incorporated  outside  India  for  the  purposes  of           

sub-section (2) of section 35 shall be the sum of the amounts computed in accordance with the following 
provisions:— 

(a) the total amount of liabilities of the insurer to holders of policies in respect of his controlled 

business on account of matured claims on which payment has to be made; 

(b) the total amount of liabilities of the insurer to holders of policies in respect of his controlled 
business  which  have  not  matured  for  payment,  the  liabilities  in  respect  thereof  being  the  liabilities 
calculated in accordance with method B below or the mean of the liabilities calculated in accordance 
with method A and method B below, whichever is greater. 

Method  A.—Actuarial  liability  calculated  on  the  same  bases  as  adopted  by  the  insurer  at  the  last 

actuarial investigation as at a date earlier than the 1st of January, 1955. 

Method B.—Actuarial liability calculated on the methods known as the modified net premium method 
of valuation, the mortality table to be used being the Oriental (25-35) ultimate mortality table, an interest 
rate of 21/2 per cent. per annum being assumed and the allowance for first year expenses being Rs.40 per 
thousand rupees of the sum assured by the policy. 

Explanation 1.—Before ascertaining the liability under method A and method B, there shall be added 
to each with-profit policy in force on the 31st day of December, 1955 (unless such addition has already 
been made) bonus at the same rate as declared at the said last actuarial investigation in respect of each 
year  or  part  of  a  year  the  policy  had  been  in  force  since  the  date  as  at  which  the  said  last  actuarial 
investigation was made. 

Explanation 2.—In calculating the liabilities in accordance with method A or method B,— 

(i) in respect of policies other than whole-life assurance and endowment assurance, such actuarial 
basis determined by the actuary making the valuation as may be consistent with the basis specified in 
the method shall be employed; and 

(ii)  the  actuary  shall  make  all  the  usual  provisions  and  reserves  as  are  ordinarily  done  in  such 

cases; 

(c) the total amount of all other liabilities of the insurer. 

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THE THIRD SCHEDULE 

(See section 36) 

PRINCIPLES FOR DETERMINING COMPENSATION PAYABLE TO CHIEF AGENTS 

The  compensation  payable  to  a  chief  agent  shall  consist  of  seventy-five  per  cent,  of  the  overriding 
commission specified in the contract relating to chief agency with the insurer on the renewal premiums 
received by the Corporation during a period of ten years from the appointed day in respect of the business 
procured  by  the  chief  agent  before  the  appointed  day;  and  such  compensation  shall  be  determined  and 
paid annually for the said period. 

PRINCIPLES FOR DETERMINING COMPENSATION PAYABLE TO SPECIAL AGENTS 

The  compensation  payable  to  a  special  agent  shall  consist  of  one  eighth  of  his  annual  average 
earnings  during  the  period  beginning  on  the  1st  day  of  January,  1952,  and  ending  on  the  31st  day  of 
December, 1955, in the form of overriding commissions in respect of business procured by him through 
insurance agents. 

49 

 
 
